Why Working Capital Will Separate Winners from Survivors in 2026, if they understand the nuance of non-cash profit
- Dr. Andy Schell, Ph.D., DBA, CPA, CMB
- 6 days ago
- 3 min read
As mortgage executives chart their course for 2026, one principle warrants renewed focus: working capital. In an environment defined by volatility, liquidity transcends its role as a mere financial metric—it becomes a strategic differentiator. Yet, many firms conflate profit, working capital, and cash, often discovering the distinction only when market conditions tighten.
Working capital, at its core, is current assets minus current liabilities. Simple in definition, complex in application. For mortgage lenders, the presence of intangible current assets often obscures true liquidity. A balance sheet may suggest strength because current assets exceed liabilities—but what if those assets never convert to cash? Consider the interest rate lock commitment (IRLC): a current asset that can evaporate if pull-through accelerates. Similarly, warehouse haircuts—capital tied up in loans held for sale—consume cash until disposition. Monitoring these dynamics demands rigor, including a monthly statement of cash flows tailored to mortgage operations.
True working capital is resilience. It enables continuity when secondary markets freeze, investor repurchase demands surge, or counterparties abruptly tighten credit. In those moments, liquidity is not optional—it is existential. It determines which firms endure and which falter.
But liquidity is not merely defensive; it is offensive. Well-capitalized lenders seize opportunities while competitors retrench. Strong working capital empowers decisive action—recruiting elite production teams, pursuing strategic acquisitions, and expanding market share amid disruption. Market leaders do not wait for recovery; they position themselves to capitalize on it.
One underutilized strategy: deploy excess cash into your own pipeline by accepting a lower warehouse advance rate. This approach earns the note rate on the haircut, preserves visibility into asset quality, and typically exits quickly through loan sale. In today’s environment, earning a superior return on cash while maintaining control of the asset is a compelling alternative to idle balances or low-yield investments.
As 2026 approaches, mortgage leaders must reimagine liquidity architecture. Cash alone is insufficient. Sustainable working capital—segmented by non-cash assets, actively managed, and strategically deployed—will distinguish firms that merely survive from those that emerge stronger.
Planning for liquidity is not pessimism. It is disciplined leadership.
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About Dr. Schell:
Dr. Andy Schell, Ph.D., DBA, MSML, MBA, CPA/CFF, CMB
Dr. Schell is CEO, Managing Partner, and Co-Founder of Mortgage Banking Solutions and the Founder of MBS Financial Services ("MBS"), based in Austin, Texas. Dr. Schell is known for his ability to turn "vision into reality" and "chaos into order" as he finds creative solutions to the challenges his clients face addressing Revenue Stability, Technology Enhancement, Financial Management, and Workflow Efficiency.
He has 4 decades of experience as a strategist directing the activity of both small and large groups of employees including mortgage lending activity at Bank of America. His leadership knowledge extends from his hands-on experience and his academic training in his MBA, his master's degree in leadership, and his doctoral work to examine employee dynamics given leader stimulus
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