Glossary

Permanent working capital

Permanent working capital is the minimum level of working capital a business always needs to keep operating — the baseline stock, debtors and cash required even at the quietest point of the trading cycle.

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BaseAlways needed

Definition

Permanent working capital is the minimum level of working capital a business always needs to keep operating — the baseline stock, debtors and cash required even at the quietest point of the trading cycle. It never falls to zero for a going concern.

In plain terms

Even in the trough of a season, a business must hold some stock and carry some unpaid invoices simply to trade. That irreducible minimum is permanent working capital, and it is best funded with long-term finance rather than a short overdraft.

Why it matters

Recognising the permanent portion helps structure funding sensibly: fund the permanent base with longer-term facilities and the fluctuating peaks with flexible ones. See temporary working capital.