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Working Capital

By Jean Murray, About.com

Working Capital is an amount of money borrowed from a bank or other lender and used by a new business for money to keep operations going and pay business bills during the startup period, when income is usually less than expenses. For many new businesses, having enough working capital means the difference between the success and failure of the business.

Working capital is a liquidity (cash)concept. A business might show a "profit," but if it cannot maintain a positive cash position (that is, having money in the bank to pay bills each month), the business cannot continue to operate.

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