Working capital is liquid money companies have to spend on regular business expenses. In accounting, working capital is often referred to as the difference between current assets and current liabilities. Current assets include cash and securities easily converted to cash. Lack of working capital presents several business drawbacks.

Inability to Pay Expenses

Managers often prefer low working capital so they can invest extra funds in higher-yield finance products. However, low capital may inhibit your ability to meet near-term expense and debt repayment obligations. This is especially true if you don't maintain enough working capital to adjust for fluctuating expenses or unexpected one-time costs. Missing bill or debt payment deadlines can lead to fees and negatively affect your credit.

Creditor Preference

Creditors want to feel comfortable that your business can pay its debts. Once you secure a loan, you have more prerogative in maintaining working capital levels. However, getting new loans may be difficult if you don't have adequate working capital. The prospective lender will have concerns about your ability to make new debt payments on top of existing monthly expense payments. In essence, low working capital restricts future borrowing potential.

Pressure to Collect Payments

One impact on low working capital is the efficiency with which your business collects payments on accounts from customers. Slower collection time frames may lead to less cash in hand when bills come due. This increases pressure on managers to create tighter payment requirements on customers, including penalties for delays. This can negatively affect relationships with top customers who don't have cash to make rapid payments on account.

Action Delays

Low working capital limits your ability to make and quickly enact decisions. If management wants to diversify its products, for instance, it may have to wait to generate more cash flow or sell off assets. This either means the loss of key assets or delayed actions. In quickly evolving industries, the inability to rapidly move on strategic maneuvers is a problem. Your business may fall behind competitors who have more liquid assets to invest in business activities.