What Are Current Assets?

Current assets are cash and other resources that your business can convert to cash within one year. They represent your short-term liquidity and ability to meet upcoming financial obligations.

Common Types of Current Assets

Current assets typically include:

• Cash and cash equivalents: Money in checking and savings accounts, money market funds
• Accounts receivable: Money owed to you by customers for goods or services already delivered
• Inventory: Products available for sale or raw materials for production
• Prepaid expenses: Payments made in advance for services not yet received (insurance, rent)
• Short-term investments: Marketable securities that can be sold quickly

Current Assets on the Balance Sheet

On your balance sheet, current assets appear first and are listed in order of liquidity — how quickly they can be converted to cash. Cash comes first, followed by receivables, then inventory.

This ordering helps lenders quickly assess how much liquid capital you have available.

Why Current Assets Matter

Lenders analyze your current assets to determine:

• Whether you can cover short-term debts and operational expenses
• How much working capital you have to manage day-to-day operations
• The quality of your receivables — are customers paying on time?
• Whether inventory levels are appropriate for your sales volume

Current vs. Fixed Assets

Unlike current assets, fixed assets (also called long-term assets) cannot be easily converted to cash within a year. Examples include real estate, equipment, and vehicles.

Both types matter for loan applications, but current assets demonstrate your immediate ability to meet financial obligations.

Improving Your Current Asset Position

Before applying for a loan, consider ways to strengthen your current assets:

• Collect outstanding receivables more aggressively
• Reduce inventory levels without affecting operations
• Convert short-term investments to cash if needed
• Negotiate better payment terms with customers