Why Working Capital Management Needs a Reality Check in 2025

In 2025 and beyond, businesses are taking a fresh perspective to building a well-positioned, agile model of working capital management.  

Over the years, businesses have had to tread a rough terrain and face disruptions such as: 

• Rising borrowing costs squeezed margins 

• Supply chain instability tied up working capital in excess inventory 

Moreover, as many growth-stage companies are underserved by traditional lenders, there was a growing need to build a strong cash flow process.  

Consequently, reports reveal that mid-sized companies, often generating between $50 million and $1 billion in annual revenue, are focusing on optimising working capital. 

As shifts in the economic landscape are reshaping how businesses access and utilise capital, we are delving into how optimising the use of working capital can have a positive impact on everything from inventory to supply chain relationships. 

How working capital management evolved in 2024

The year 2024 brought about a paradigm shift, forcing businesses globally to rethink their cash flow strategies. 

With every major working capital metric declining and $1.76 trillion locked up, financial leaders had no choice but to act quickly.  

Globally, 51% of firms report shorter cash conversion cycles after using flexible financing and small business lending grew, with the Small Business Administration reporting a 7% increase in financing. 

In India, working capital loans grew to 71% of total secured debt in Q4 2023 (up from 66% in Q1). One of the significant developments included the net working capital cycles returning to pre-pandemic levels of 73 days, signalling stability. 

Additionally, about 50% of MSMEs recorded more than 10% YoY growth in sales from 2021 to 2024 while micro-enterprises secured bigger loans, with ticket sizes above ₹10 lakh doubling since 2020. 

Considering how access to liquidity became a boardroom priority, especially for the MSME segment, many companies are now open to leveraging smarter, flexible financing solutions. 

Embracing a new era of working capital management

As per recent reports, 81% of CFOs adopted working capital solutions in 2024, marking a 13% YoY rise. 

While working capital ratios improved year over year, businesses have also sharpened their abilities to anticipate cash flow requirements before a crisis arose. There is also a 16% rise in businesses using working capital strategically instead of as an emergency fix. 

We’re witnessing digital-first strategies gain momentum, with AI-driven credit underwriting leading the charge.

Some of the big shifts to look forward to are: 

AI & credit underwriting 

Banks are using AI to speed up credit decisions. Over 50% plan to invest $100,000+ in AI credit models by 2027. 

Digital public infrastructure & SME lending 

DPI's enormous scale is enabling speedier financial inclusion and enhancing credit delivery for MSMEs. Digital lending in India has grown 12x, driven by DPI advancements. 

Tokenization in trade finance 

Firms are exploring tokenization to increase transparency and liquidity in trade finance. The tokenized asset market could reach USD 30.1 trillion by 2034, with trade finance assets accounting for 16% of this growth. 

Supply chain volatility 

Uncertainty in supply chains has pushed companies to support their suppliers through deep-tier financing, now adopted by 76% of businesses. At the same time, 74% of banks are focusing on ESG-aligned financing to meet sustainability demands. 

On-demand liquidity 

Faster access to funds is becoming essential for SMEs managing cash flow pressures. Nearly half (48%) expect liquidity within 24-48 hours, while 55% seek funding within a week to keep operations running smoothly.

CFOs are embedding working capital solutions into future plans

With disrupted supply chains and tightening credit markets, CFOs responded by strengthening banking partnerships and embracing flexible financing solutions to improve cash conversion cycles. 

Top 2025 priorities include: 

• Deepening supplier collaboration to optimise working capital 

• Choosing sector-specific solutions over generic services 

• Driving business cases for smarter use of working capital  

• Prioritising sustainability compliance and ESG-driven financing 

• 58% of CFOs are focusing on tech investments to optimise financial planning and analysis 

Future working capital outlook in India

Given the sheer scale of India’s economy—and the scale of the challenges it faces—Moody’s estimates that working capital requirements will remain high for Indian companies. 

Corporates in India will require $70-100 billion annually for the next two years to fund growth, refinancing, and shareholder payouts. 

At CredAble, we are on a mission to bridge this gap through our working capital financing solutions suite, using state-of-the-art technology platforms, deep ERP, and bank integrations. 

Backed by a team of experienced bankers and tech evangelists, we have been able to constantly achieve new milestones and extend our reach to over 3,50,000+ business borrowers by prioritising a laser-sharp understanding of client needs. By combining deep banking knowledge with advanced tools, we are actively shaping the working capital financing ecosystem.

Think Working Capital… Think CredAble!