85% of CFOs Use Working Capital to Safeguard Businesses From Macroeconomic Shifts

The adoption of working capital solutions has seen a rise among growth corporates, commonly referred to as middle-market firms, in North America.

Their popularity stems from their ability to address a spectrum of needs, making them a resource for firms seeking comprehensive support in navigating the complexities of today’s business landscape.

“2023-2024 Growth Corporates Working Capital Index (WCI): North America Edition” a PYMNTS Intelligence and Visa collaboration, explored the working capital needs of growth corporates that generate annual revenues between $50 million and $1 billion. It also examined the strategies adopted by chief financial officers and treasurers across various sectors in managing the day-to-day needs of their businesses while ensuring sufficient cash flow for growth and expansion.

According to the study, the increasing adoption of working capital solutions such as working capital loans, virtual credit cards and overdrafts can be attributed to the diverse impact these solutions have on various aspects of business growth and expansion.

Specifically, more than 70% of middle-market firms in the region that used external working capital solutions reported improved business metrics, and nearly 9 in 10 growth corporates achieved favorable payment terms for new business initiatives.

Similarly, 86% of CFOs acknowledged the role of financing in obtaining favorable capital for new initiatives, and 85% used these solutions to safeguard their businesses from these macroeconomic challenges. Working capital solutions were also instrumental in the digitization of IT or legacy systems, according to 73% of corporate finance professionals.

Overall, 71% of growth corporates in North America used working capital solutions in the 12 months before the study, marking the third-highest use rate among all five regions studied, trailing behind Latin America and the Caribbean region and Europe.

The study also highlighted the strategic use of working capital solutions by top-performing growth corporates to foster growth and development. In the fleet and mobility sector, all top performers relied on external working capital for growth purposes, while 7 in 10 healthcare top performers followed suit. Agriculture and commercial travel growth corporates used working capital solutions for cash flow continuity reasons at higher rates compared to the average among top performers.

This year, it is projected that 90% of North American growth corporates will continue accessing financing, with working capital loans, bank credit lines and corporate overdrafts being the primary external capital sources. Additionally, virtual cards are expected to witness increased use, with one-third of growth corporates planning to use them as their primary working capital solution.

As companies strive to enhance their financial strategies moving forward, the report findings suggest that working capital solutions will play a crucial role in the future growth and success of businesses in North America, contributing to improved operational efficiency, optimized cash flow management, and increased resilience in the face of dynamic market challenges.