Understanding Negative Working Capital

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What Is Negative Working Capital?
Positive Working Capital
Zero Working Capital
How Negative Working Capital Arises
Pros and Cons of Negative Working Capital
When Is Negative Working Capital Good vs Bad?
Good Negative Working Capital
Bad Negative Working Capital
Which Industries Typically Have Higher Negative Capital?
Strategies for Dealing With Negative Working Capital
Fully understand the flow of cash within their company. For this, analyzing monthly, quarterly, and yearly income statements can help. Keep track of account receivables. Analyze how long it takes to completely sell through inventory batches. Optimize billing cycles— meaning business owners should space out expenses to match estimated sales.
Negative Working Capital Example Calculation
The Takeaway
3 Small Business Loan Tips
Online lenders generally offer fast application reviews and quick access to cash. Conveniently, you can find recommended small business loans by using Lantern by SoFi. Traditionally, lenders like to see a business that’s at least two years old when considering a small business loan. If you need to borrow money to cover seasonal cash flow fluctuations, a business line of credit, rather than a term loan, provides the flexibility you likely need.
Frequently Asked Questions
Photo credit: iStock/JLco - Julia Amaral
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About the Author
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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