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Negative working capital is when a company’s current liabilities are greater than its current assets. Current liabilities are those that are due in less than 12 months. Current assets are those that can turn into cash in less than 12 months.

It’s easy to think that companies with negative net working capital would be at financial risk, but that’s not necessarily the case. There are many situations where having occasional and controlled negative working capital can actually work in a business’s favor.

Read on for an in-depth look at what it means to have negative working capital, when it can happen, and whether it’s a good or bad thing for your small business.

What Is Negative Working Capital?

Working capital is the difference between a business’s current assets and current liabilities.

Working Capital = Current Assets – Current Liabilities

A current asset is an asset that can be easily converted to cash within a year. Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, prepaid liabilities, and other liquid assets. A current liability is any debt that is expected to be repaid within a year. Current liabilities include obligations such as accounts payable and amounts due to suppliers, employee wages, and payroll tax withholding.

Ideally, current assets should be greater than current liabilities but for many businesses, that’s not always the case.

Negative working capital is when a company’s current liabilities are greater than its current assets, as stated on the firm’s balance sheet. While that may sound like a risky proposition, some businesses are able to dip into periods of negative working capital without any ill effects.

Negative working capital commonly arises when a business generates cash very quickly because it can sell products to its customers before it has to pay the bills to its vendors for the original goods or raw materials. It then uses that cash to purchase more inventory or expedite growth in other ways. By doing this, the company is effectively using the vendor’s money as an interest-free loan. The firm still has an outstanding liability, however, which means it can end up with negative working capital.

Positive Working Capital

Positive working capital is when a company’s current assets exceed its current liabilities. It’s the opposite of negative working capital and is usually a good position for a company to be in. Positive working capital means your business will be able to fulfill its financial obligations in the coming year and still have cash leftover to deal with any market disruptions (or other challenges) and/or invest in growth.

In order to be approved for a small business loan, businesses usually need to have a positive working capital, since many loans require assets as collateral. If the business is upside down on its debts vs. its assets, it may have trouble getting approved. However, working capital is one of many factors that lenders look at when approving loans.

Is it possible to have too much positive working capital? Yes. If assets are sitting somewhere and not helping the business grow and generate further revenue, then it’s possible they could be better used elsewhere to fuel the company’s next phase of development. To be competitive in today’s market, leveraging growth for healthy, steady business expansion is often essential.

Zero Working Capital

Zero working capital is when a company’s current assets are the same amount as its current liabilities. Having zero working capital can be a good sign, suggesting that the company is managing its resources effectively, maintaining just enough liquidity to cover its short-term obligations without tying up excess capital in non-productive assets.

However, having zero working capital can also signify that the company is operating on thin margins and doesn’t have much room for error. If unexpected expenses arise or if there’s a downturn in sales, the company could face liquidity problems.

Sometimes, a company might intentionally maintain zero working capital for a short period, perhaps to finance a specific project or investment. However, this is typically not a sustainable long-term strategy.

How to Calculate Negative Working Capital

Negative working capital is calculated by subtracting current liabilities from current assets. If liabilities exceed assets, the result is negative working capital. The formula is the same as the formula for working capital, with the end result being negative:

Negative Working Capital = Current Assets – Current Liabilities

Here’s a negative working capital example:

A gaming retailer buys $1.5 million worth of the latest console directly from the manufacturer. It sells every console within the first day, but doesn’t have to pay its bill for the next 45 days. So it uses this influx of cash to buy more consoles and further increase revenues. In this case, negative working capital works because sales are growing. As a result, this retailer should not have trouble meeting its short-term financial obligations as they become due.

Recommended: How to Calculate Cash Flow

How Negative Working Capital Arises

While negative working capital might seem alarming, there are situations where it can be a strategic choice or a temporary condition. Here’s a look at some reasons why a company might have negative working capital.

•  Industry norms: Some industries naturally operate with negative working capital due to their business models. For example, retail businesses often collect cash from customers before paying suppliers for inventory. This allows them to operate with negative working capital, using suppliers’ credit to finance their operations.

•  Rapid growth: A company experiencing rapid growth might have negative working capital because it’s investing heavily in inventory and receivables to support increased sales. While this can strain short-term liquidity, it’s often seen as a sign of expansion and can be managed if the growth trajectory is sustainable.

•  Seasonal variation: Businesses that experience seasonal fluctuations in sales may have negative working capital during slow periods when they build up inventory and receivables in anticipation of higher demand.

•  Efficiency goals: In some cases, companies deliberately manage their working capital to optimize efficiency. They may prioritize cash flow by delaying payments to suppliers or accelerating the collection of receivables, even if it results in negative working capital on their balance sheet.

When Is Negative Working Capital Good vs Bad?

As mentioned, negative working capital can either be good or bad. Let’s take a closer look at why.

Good Negative Working Capital

Negative working capital can be a good thing when companies are able to sell their inventory faster than their suppliers expect payment. This cash surplus allows the company to purchase more inventory or spur growth in other ways. In this scenario, the vendor is essentially financing part of the company’s operating and investment expenses — similar to a zero-interest loan.

Negative working capital can also provide a company with greater flexibility and agility to respond to changing market conditions or unexpected expenses, while also allowing it to take advantage of growth opportunities as they arise.

Recommended: Business Loan vs Personal Loan: Which Is Right for You?

Bad Negative Working Capital

As soon as a company is unable to pay its operational costs or suppliers on time, negative working capital can shift from good to bad. Even if a company may have utilized negative working capital in the past without issues, a hiccup in sales can hurt operations fast. Negative working capital leaves a company with minimal cushion to absorb the unexpected.

If a business must constantly delay payments to vendors and suppliers, it could strain relationships with those partners. Over time, suppliers may become reluctant to extend credit or offer favorable terms, which could affect a company’s ability to secure necessary goods and services.

Recommended: 15 Types of Business Loans to Consider

Which Industries Typically Have Higher Negative Capital?

Companies with rapid turnover of inventory or services and make their money through cash often have negative working capital. This includes large food stores, retailers, fast food restaurants, service-oriented business, e-commerce companies, and software companies.

Strategies for Dealing With Negative Working Capital

To stay on top of negative working capital, business owners may want to:

1.   Fully understand the flow of cash within your company. Using a business balance sheet to track income and expenses can help you pinpoint money issues that could contribute to negative working capital.

2.   Keep track of account receivables.

3.   Analyze how long it takes to completely sell through inventory batches.

4.   Optimize billing cycles to space out expenses to match estimated sales.

Recommended: How Much Does it Cost to Start a Business?

The Takeaway

Negative working capital is a state in which a company’s current liabilities exceed its current assets. Negative net working capital is fine as long as a company is able to pay its operational expenses and suppliers on time. If it is unable to do so, however, its long-term financial health may be in jeopardy.

While negative working capital can offer certain advantages in terms of cash flow management and flexibility, it’s essential for companies to carefully monitor and manage their working capital levels to avoid potential pitfalls and maintain financial stability.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What does negative working capital indicate?

Negative working capital can indicate a business has a high inventory turnover, meaning it’s able to sell off inventory before any amount is owed to the supplier. On the other hand, it can also mean that the business is having difficulty receiving on-time payments from its customers.

Is negative working capital typically a bad thing to have?

Not necessarily. Businesses in retail or fast-moving consumer goods often operate with negative working capital because they receive payment from customers before paying their suppliers. However, negative working capital can also signify liquidity issues, financial distress, or strained supplier relationships if the company is unable to meet its short-term obligations.

Can working capital being too high be a problem?

Yes. High working capital often means that a significant portion of the company’s assets is tied up in short-term assets like cash, accounts receivable, and inventory. If these assets are not being efficiently utilized, it can lead to lower returns on investment and reduced profitability.

Photo credit: iStock/designer491

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOSMB-Q424-006

The minimum credit score for a business loan typically ranges from 500 to 680, depending on the lender and loan type. Traditional banks often require higher scores (around 680 or more), while alternative lenders may accept lower scores (500-600). Higher credit scores improve loan approval chances and the offering of better terms.

Lenders may also look at your business credit score. A good business credit score is considered 70 or above, but this will also vary by lender.

Even if your credit scores don’t meet those minimums, or you’re not even sure if you have a credit score for your business, you still have plenty of options. Read on to learn about credit requirements for different types of small business loans and what you can do to build your credit score, if needed.

What Is a Business Credit Score?

A business credit score is used to measure the creditworthiness of your business. Your business credit is linked to you by your Employer Identification Number (EIN), which is how the government recognizes your business for tax purposes.

Like your personal credit score, your business credit score is a measure of your historical reliability with your financial commitments. The difference is that this credit profile specifically tracks your business’s financial history.

Types of Business Credit Scores

There are three credit bureaus that measure your business credit scores: Experian, Equifax, and Dun & Bradstreet. Most credit bureaus will give you a business credit score ranging from 1 to 100. An Equifax business credit report, though, will give you three scores: Payment Index, Business Credit Risk Score, and Business Failure Score.

As a small business, you also might encounter something called a FICO® SBSS (Small Business Scoring Service) score, which uses information from all three bureaus. Not all lenders require a FICO SBSS score, but you will likely need one if you are applying for a loan backed by the U.S. Small Business Administration (SBA). Your FICO SBSS score will land somewhere between zero and 300.

Why Do Lenders Care About Your Credit Score for Business Loans?

When applying for a small business loan, lenders will want to know how risky of a borrower you are. Your business credit score is what lenders will look at to determine your level of risk. The higher your score, the less risky a lender will view you. Typically, businesses with high credit scores will qualify for the best interest rates and terms.

Lenders ideally want to see a business credit score of 70 or higher (on a scale of 1 to 100). But again, if you don’t quite meet the minimum, you still may qualify for the loan, you’ll just pay a higher rate than you would with a higher credit score.

Lenders don’t just look at credit scores, though. They’ll also assess how long you’ve been in business and your annual revenue, among other factors.

Recommended: What Does a Credit Score of 800 Mean?

What Is Considered a Good Business Credit Score?

If a lender wants to see your credit score for business loans, it may look at one (or more) scores from the three business credit bureaus. Each has its own scoring range and its own risk categories.

Fitting into one of these risk levels doesn’t necessarily translate into certain success or assured failure in accessing funds. Higher scores, however, can certainly help your odds, while lower scores can translate into smaller loan amounts, higher interest rates, shorter repayment terms, or being denied approval for the loan.

Whatever your scores, it can be a good idea to shop around and compare business loan rates to make sure you get the best rates and terms possible for your business.

What Impacts Business Credit Scores

Each of the business credit bureaus uses a slightly different formula for determining your credit score for small business loans, but, generally, these factors weigh in:

•   How much debt your business has compared to its available credit

•   Whether you pay bills on time

•   How old your credit accounts are

•   Your industry

•   Your company’s size

Credit Score Requirements for Different Lenders

The credit score you need for a business loan depends on the lender and the business credit score system they look at. No matter what your credit score is, though, there are all types of business loans you may qualify for, including ones for businesses with poor credit and first-time business loans.

Let’s look at the FICO credit score (both business and personal) for business loans of different types.

Recommended: What Is an Unsecured Business Loan?

SBA Credit Score Requirements

The Small Business Administration looks at the FICO SBSS credit score for SBA loans like the 7(a) and 504. Here are the minimum requirements set by the SBA (keep in mind that individual lenders may require higher scores):

•   7(a) Small Business Loans: 155

•   Community Advantage: 140

•   Express Bridge Loan Pilot Program: 130

If your business doesn’t have a FICO SBSS score, SBA lenders may look at your personal FICO score (which ranges from 300-850). In that case, you’ll generally need a minimum score between 620 and 650, depending on the type of loan and lender. Those with personal credit scores of 720 or higher typically have the best chance of getting approved for an SBA loan.

Bank Loan Credit Score Requirements

Banks can set their own credit score requirements, and often they’re even more stringent than what the SBA requires. Check for specific bank credit score requirements before applying for a loan.

Equipment Financing Credit Scores

If you don’t have good credit but want to buy equipment, an equipment loan (also called equipment financing) can be a good option. Credit score requirements tend to be less strict for equipment loans because the equipment you’re buying acts as collateral for the loan and therefore reduces the lender’s risk.

A personal FICO credit score of 630 may be enough to secure this type of financing. In some cases, you can qualify for equipment financing with personal credit scores in the low 500s. Keep in mind, though, that you’ll most likely pay a higher interest rate if you have a low credit score because the lender is taking on more risk.

Short-Term Loan Credit Scores

Another option for financing if you don’t have stellar credit is a short-term business loan from an online or alternative lender. These lenders often look less at your credit score for business loans and more at other factors, like your annual revenues.

You may be able to get a short-term loan from an alternative lender with a minimum personal credit FICO score of 600, though you’ll want to keep in mind that the lower your credit score, generally the higher your interest rates will be.

And if you’re a startup, you may be able to find lenders that don’t require any particular credit score for startup business loans. Many won’t list the required credit score on their applications because they’ll work with you based on your other criteria.

Do Personal Credit Scores Matter for Business Loans?

In many cases, yes. When you apply for a small business loan, lenders will often look at both personal and business scores. If your business hasn’t yet established any credit scores, they will just look at your personal credit scores to determine whether your business qualifies for the loan.

What Is a Good Personal Credit Score?

There are three major credit bureaus that each calculate your personal credit score: Equifax, TransUnion, and Experian, and each with its own scoring range.

What Factors Affect a Personal Credit Score?

Each personal credit bureau uses different criteria for credit scoring, but they all generally look at the same factors:

•   Credit utilization: This is how much of your available credit you are currently utilizing. Your credit utilization ratio is calculated by dividing the total revolving credit you are using by the total of all your credit limits. Using more than 30% of your available credit is generally seen as a negative to creditors.

•   Age of accounts: Credit bureaus take into consideration how old your credit accounts are. The older the accounts, the more positive the impact on your credit scores. Because of this, you may not want to close credit accounts, even if you no longer use them.

•   Payment history: Credit bureaus look at whether you have any late or nonpayments on your accounts. Even one missed payment can have a negative impact on your score.

•   New credit: Agencies look at the number of credit accounts you’ve recently opened, as well as the number of hard inquiries lenders make when you apply for credit.

•   Credit mix: Credit scoring models also consider the types of accounts you have, as this can show how well you manage a range of credit products.

What Can You Do if You Have a Low Business Credit Score?

If you don’t need funds right away, a good strategy is to focus on establishing business credit and/or boosting your business credit profile enough to get out of the high risk category.

You can start building business credit by opening trade credit accounts with vendors that report financial activity to the business credit bureaus. This might be an office supply store you frequently purchase products from or the company you buy inventory from.

You can also build credit by opening a business credit card and making timely payments.

If you need capital right away, you also have options. Here are some ways to secure a loan without strong credit.

Put Up Collateral

Some business loans require business collateral, which is an asset you put up against the loan. If you are unable to pay off the loan, the lender can seize that asset to cover your debt. Having collateral lowers the risk for the lender, so you may qualify for a loan even with fair credit.

Provide a Personal Guarantees

Another option is to provide a personal guarantee. This is an agreement that states that, should your business be unable to pay off the loan, you will be personally responsible for paying it off.

Apply for Grants

Small business loans aren’t your only option for finding the money you need. There are also small business grants offered by local and federal governments, corporations, and nonprofits. Business grants do not have to be repaid.

Most grants have specific criteria a business needs to meet, such as being a minority-, women-, or veteran-owned business, or being in a certain industry. Grants also tend to be competitive, so read the fine print to make sure you qualify and follow the application instructions carefully to increase the odds of being selected. You may even want to try a combination of grants and loans to ensure you have the capital you need for your business.

How to Build Your Credit Score

If you want to build your personal credit profile, it can be a good idea to pay your bills on time and work on paying down existing debt, which can help lower your credit utilization ratio.

It can also be helpful to avoid applying for multiple loans or credit cards at the same time, as each one can impact your credit score for a short period. You may also want to periodically check your credit reports. If you see any discrepancy (maybe you paid off a credit card and that’s not reflected on the report), inform the credit bureau right away so your score reflects accurate information.

Are No Credit Check Business Loans Possible?

Yes, it is possible to find a loan that doesn’t look at your credit score. These lenders may look at other criteria, such as annual revenues, to determine eligibility.

These can be great in a pinch, but be aware that no credit check business loans tend to have higher interest rates than traditional loans. Only you can determine whether it’s worth it to pay that expense. If having the money now means you can take advantage of opportunities for your business or get you out of a tough spot, it may be worth the cost.

The Takeaway

While there is no set minimum credit score for business loans, lenders prefer to see good to excellent scores in order to qualify you for the best rates and terms. Because your credit score is a measure of your financial responsibility, it’s one of the key factors that lenders consider in your loan application. Lenders will typically look at both your personal credit scores and your business credit scores, if available.

However, your credit scores are just one part of your business’s financial profile. Lenders will typically take many factors — from your annual revenues to your business plan — into account during the application process. In addition, there are many different types of loans available, so even if your credit scores aren’t excellent, you likely still have options.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

Is there a minimum credit score needed to start a business?

There isn’t a minimum credit score (business or personal) required to start a business. However, if you want to take out a business loan, some lenders do have credit score requirements to qualify.

Can you get a business loan with a 600 credit score?

There are lenders who will approve your application if you have a 600 credit score, though banks and SBA lenders tend to look for scores starting at 620 or higher.

Can you start a business with no credit and no money?

Starting a business with no credit and no money is challenging, but possible. Entrepreneurs can begin by offering services that require minimal capital, like freelancing or consulting, relying on skills rather than assets. If you need a loan, online lenders often have lower qualifications for business loans than traditional banks do.

How can I build my business credit?

You can build your business credit by taking out a business credit card or loan and repaying it on time, as well as by opening trade accounts under your business name with companies that report to business credit bureaus.

Photo credit: iStock/JLco – Julia Amaral

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOSMB-Q324-058

Accounts payable are bills and other short-term debts that a business needs to pay. It includes all of a company’s current liabilities (due within one year), making it a key component of small business accounting.

Understanding accounts payable and having a dependable accounts payable system is essential to running a successful small business. Here’s what you need to know.

What Is Accounts Payable (AP)?

When a business buys goods or services from a vendor or supplier on credit that needs to be paid back in the near term, the accounting entry is known as “accounts payable.” On a balance sheet, accounts payable appears under current liabilities.

Accounts payable differs from a loan payable in that accounts payable does not charge interest (unless payment is late) and is typically based on goods or services acquired. Loan payables, such as balances on various kinds of small business loans, generally charge interest and are based on the prior receipt of a sum of cash from a lender.

In a company, the term “accounts payable” is also used as the name of the department responsible for handling vendor invoices and bills — from recording them in the general ledger to making payments to suppliers and other third parties.

Recommended: Guide to Vendor Financing

Is Accounts Payable an Asset or Liability?

In small business accounting, accounts payable is a liability since it is money owed to vendors and creditors. The account grows larger when more money is owed to vendors. When accounts payable increases, a business will typically have more cash on hand because of the delay in paying amounts owed. This typically results in a temporary increase in liquidity.

The short-term debt in accounts payable can help keep cash on hand to pay for other items, but eventually creditors will require payment.

Accounts payable differs from business expenses in that accounts payable is shown on a business’s balance sheet, whereas business expenses are shown on the income statement.

Recommended: Small Business Balance Sheets with Examples

How Accounts Payable Works

When a business purchases goods or services from a supplier on credit, also known as trade credit, payment isn’t made immediately. Typically, it will be due within 30 or 60 days, sometimes longer.

Here’s how it works:

A business will send the supplier a purchase order. The supplier will then provide the goods or services the business purchased, along with an invoice requesting payment by a certain date. The person or department responsible for accounts payable will verify the invoice against the purchase order and ensure the goods or services were received before issuing payment to their vendors.

If amounts owed to suppliers and other third parties are not paid within the agreed terms, late payments or defaults can result.

The sum of all outstanding payments owed by a business to third parties is recorded as the balance of accounts payable on the company’s balance sheet. Any increase or decrease in accounts payable from one accounting period to another will appear on the cash flow statement.

Recommended: How to Calculate Cash Flow

4 Steps of the Accounts Payable Process

Managing business finances is one of the most important aspects of running a small business. The accounts payable process has four key steps. Going through this defined process helps avoid errors and missing a payment deadline to a vendor.

1. Invoice Capture

The accounts payable process generally begins when a supplier or third party submits an invoice to the accounts payable department. After receiving the invoice, the accounts payable clerk will verify the invoice is valid and not a duplicate, code the invoice to the general ledger, and, depending on the company’s process, conduct a two-way match (in which invoices are matched to purchase orders) or a three-way match (in which invoices are matched to purchase orders and receiving information).

2. Invoice Approval

Once all the data is entered, an invoice must be approved. This involves an individual from the accounts payable department routing the invoice to the appropriate person (or people) in the company to get the necessary approval(s).

3. Payment Authorization

After an invoice is approved, the accounts payable clerk may need to get authorization to make a payment. The authorization will typically include the payment amount, method of payment, and date the payment will be made.

4. Payment Execution

Once payment is authorized, the invoice can be paid. Payment should be processed before or on the bill’s due date and may be done by check, electronic bank-to-bank payment, or credit card. Once the invoice is paid, it can be closed out in the accounting system.

Recommended: Debt-to-EBITDA Ratio Explained

Internal Controls and Audits

Internal controls are standardized operating procedures used by companies in their accounts payable process to reduce the risk that a business will pay a fraudulent or inaccurate invoice, pay a vendor invoice twice, and/or fail to pay an invoice on time.

These controls often include:

•  Purchase order approval

•  Invoice approval

•  Two-way matching (in which invoices are matched to purchase orders) or three-way matching (in which invoices are matched to purchase orders and receiving information)

•  Auditing for duplicates (which involves checking files manually or with an accounts payable automation platform to make sure duplicate payments aren’t made)

Accounts Payable Examples

Generally, any items bought on short-term credit fall under the accounts payable umbrella. This includes:

•  Licensing costs

•  Leasing costs

•  Subcontractor bills

•  Amounts owed for raw materials and fuel

•  Products and equipment received but not paid for

•  Subscription services

•  Installment payment plans

Accounts Payable vs Accounts Receivable

Accounts receivable is basically the opposite of accounts payable. While accounts payable is the money a company owes to suppliers and vendors, accounts receivable is the money that is owed to the company, generally by its customers. If two companies make a transaction on credit, one records it to accounts payable, while the other records it to accounts receivable.

Here’s a side-by-side comparison of accounts payable vs accounts receivable:

When a business owner needs an influx of cash, accounts receivable financing is a type of financing that enables them to receive early payment on outstanding invoices. The owner must then repay the money (plus a fee) to the financing company when they receive payment from their customers.

Recommended: GAAP Explained

Trade Payables and Accounts Payables

Though they sound similar, trade payables are actually slightly different from accounts payables.

Trade payables are amounts a company owes its vendors for inventory-related goods, such as business supplies or materials that are part of the company’s inventory. Accounts payables, on the other hand, includes trade payables, as well as all other short-term debts.

The Takeaway

Accounts payable is a current liability on a company’s balance sheet. It includes all of the short-term credits extended to a business by vendors and creditors for goods or services rendered but not yet paid for. Accounts payable also refers to the department or person in a firm that records and handles purchases and payments.

Lenders and potential investors will often look at a company’s accounts payable, as well as their accounts receivable, to gauge the financial health of a business. Mismanagement on either side of the equation can have a negative impact on your business’s ability to get credit or get approved for a small business loan, and could also put your business at risk.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What are examples of accounts payables?

Any good or service that is purchased by the company on short-term credit should be listed as accounts payable on the balance sheet. Some examples include:

•  Leased vehicles

•  Subcontractor services

•  Equipment

•  Materials

•  Business supplies

•  Subscription services

What is the purpose of accounts payable?

The purpose of accounts payable is to accurately track what’s owed to vendors and suppliers and to ensure that payments are properly approved and processed. Having accurate accounts payable information is essential to producing an accurate balance sheet.

What is accounts payable reconciliation?

Accounts payable reconciliation is a process in which the accounts payable department verifies that the detailed total of all accounts payable outstanding matches the payables account balance stated in the general ledger. This is done to ensure that the amount of accounts payable reported in the balance sheet is accurate.

Photo credit: iStock/Panuwat Dangsungnoen

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOSMB-Q324-051

Cash flow is the amount of money in and out of your business. Assessing cash flow is an essential step in understanding how operating expenses impact your business’s bottom line.

Many companies use accounting software to do the job. But, depending on the complexity of your business, it may be possible to calculate cash flow using a spreadsheet and some basic math formulas.

Read on to learn more on cash flow, including how to calculate cash flow and how to manage cash flow problems.

What Is Cash Flow?

Cash flow refers to the movement of money in and out of a business over a specific period. It measures the company’s liquidity and ability to meet financial obligations.

Positive cash flow occurs when more money is coming in than going out, while negative cash flow indicates the opposite. Effective cash flow management ensures businesses can cover expenses like payroll, rent, and loan repayments while investing in growth.

Cash flow is typically divided into three categories: operating, investing, and financing activities, each contributing to a comprehensive view of a company’s financial health.

Why Understanding Cash Flow Is Important

Calculating cash flow lets you see how your business’s expenses (outflows) compare to your company’s income (inflows). A business generally needs to be cash flow positive, meaning monthly revenue exceeds your operating expenses, to maintain a sustained, profitable existence.

Understanding your cash flow cycle also helps you make financial projections, which can inform your decision-making process. It includes:

•   Anticipating inventory needs, including how to pay for supplies

•   Determining if your prices are reasonable

•   Projecting your fixed expenses versus seasonal revenue

Your cash flow projections can help you figure out how you’re going to finance the lean months while being fully prepared for your busy months.

When you’re cash flow positive, you’re likely offering the right services at the right price. But if your revenue isn’t covering your operating expenses, it may be time to rethink your business structure.

No matter what type of business you operate, your cash flow is one of the most critical financial components to understand. Not only does it help you manage your business’s accounts, but it’s also often required by lenders and investors when you apply for financing.

Recommended: Getting a Cash Flow Loan for Your Small Business

How Is Cash Flow Calculated?

At its core, cash flow involves subtracting monthly expenses from your monthly balance and income. The money you can transfer to the next month’s balance is your cash flow.

More complex businesses can identify separate categories for cash flow from operations, investing, and financing.

Here, we’ll discuss a few different cash flow formulas: operating cash flow, free cash flow, cash flow forecasting, and discounted cash flow.

Recommended: Net Operating Working Capital

Operating Cash Flow Formula

Your operating cash flow looks at whether your company is making a net profit from its core business operations. It hones in on cash inflows and outflows from a company’s core operations and ignores cash flows related to outside investing or non-core operations.

Any revenue your company has brought in through sales is called your “cash in.”

The expenses, such as rent, payments on small business loans, credit card payments, taxes, salaries, and manufacturing, are called “cash out.”

To calculate your operating cash flow, take the following steps each month:

1.    Add the starting balance and revenue to determine your cash in.

2.    Add up all expenses to determine cash out.

3.    Subtract cash out from cash in.

Your remaining amount is your operating cash flow for the month.

(The formula can include other things for more complex businesses, such as depreciation, but let’s keep things comparatively simple for now.)

Recommended: Business vs Personal Bank Account: What’s the Difference?

Operating Cash Flow Example

Let’s look at an example for an imaginary company:

XYZ Retail had a balance of $100,000 roll over from June into July. In July, XYZ Retail grossed $400,000 in revenue. Its total cash in is $500,000.

XYZ Retail’s expenses for the month totaled $250,000, and taxes on the profit amounted to $62,500. Its total cash out is $312,500.

As the formula for operating cash flow is:

Cash In – Cash Out = Operating Cash Flow

XYZ Retail’s formula would look like this:

$500,000 – $312,500 = $187,500

Therefore, XYZ Retail has $187,500 of cash flow to roll over. The company will add the $187,500 balance to whatever revenue they make the next month.

Recommended: What Is a Variable Costing Income Statement?

Free Cash Flow Formula

Calculating your free cash flow allows you to determine how much spending money you have after determining operating cash flow and capital expenses.

Capital expenses are funds invested in the long-term life of your business and spent on larger scale purchases like trucks, large machinery, and building purchases. This differs from operating costs because those are day-to-day expenses such as salaries, smaller supplies (e.g., copiers and computers), and building rentals, not purchases.

Once free cash flow has reached an amount with which a business owner is comfortable, the owner typically uses the funds to make decisions about the future, including expansion or hiring additional people or an outside company to provide support.

There are a few ways to calculate free cash flow. However, the simplest takes the following steps:

1.    Determine operating cash flow (see the formula in the previous section).

2.    Add up capital expenditures.

3.    Subtract capital expenditures from operating cash flow.

There are other formulas for calculating free cash flow. But they’re usually for instances where a company hasn’t been closely monitoring its operating cash flow and capital expenditures.

However, if those have gone to the wayside, the formulas you could use in a pinch are:

•   (Net Operating Profit – Taxes) – Net Operating Capital Investment = Free Cash Flow

•   Sales Revenue – (Operating Costs + Taxes) – Operating Capital Investments = Free Cash Flow

Free Cash Flow Example

Let’s revisit the fictional company XYZ Retail.

At the end of July, XYZ Retail’s total operating cash flow was $187,500.

That same month, they made upgrades to their building to make it more ADA accessible. This would be a capital expenditure because those upgrades are permanent and can help with future success. The total capital expenditure amount was $53,050.

As the formula for free cash flow is:

Operating Cash Flow – Capital Expenditures = Free Cash Flow

XYZ Retail’s formula would be:

$187,500 – $53,050 = $134,450

This means the free cash flow is $134,450.

Cash Flow Forecast Formula

Calculating your cash flow forecast can help you plan month to month, quarter to quarter, or year to year by figuring out approximately how much money you’ll have on hand.

Forecasting cash flow is more complex than operating and free cash flows, as you need more details.

There are two methods of cash flow forecasting: Direct and indirect.

To calculate direct cash flow, take the following steps:

1.    Determine cash in.

2.    Determine cash out.

3.    Subtract cash out from cash in.

4.    Do this month over month to make an educated guess for the coming months.

Cash flow can wax and wane depending on the season. Therefore, something like a summer-only direct cash flow amount may not apply to the winter.

While this seems simple on the surface, this isn’t necessarily the case. You need to know precisely where all money is coming and going from. (Luckily, you can set up a spreadsheet to keep track of it, but you should update it frequently to ensure nothing gets missed.)

The indirect method of calculating cash flow forecast focuses on net income and factors affecting profitability — but not cash balance. It uses your profit and loss statements and balance sheet. To use this method, follow these steps:

1.    Get your current balance from your balance sheet. If you have previous ones, check those as well.

2.    Compare it to your profit and loss statements to get a decent estimate of your monthly cash in and cash out.

This method is more commonly used among people who don’t want to hire a bookkeeper or use accounting software or those with so many transactions that monitoring every single one is difficult.

Neither method is right or wrong; try out both to see which works best for you.

Cash Flow Forecast Example

American Express provides a cash flow forecast template , as well as an example of what it might look like.

Discounted Cash Flow Formula

Discounted cash flow (DCF) estimates the future value of a business based on projected cash flows. It can help determine whether an investment is likely to pay off in the long run.

The term “discounted” is there to account for inflation and the lower value of money received in the future compared to money received now.

The discount rate is usually a company’s weighted average cost of capital (WACC), which represents how much a company must pay to its investors and lenders.

(Note: The discount rate can also be an interest rate; it depends on the type of investment.)

The discounted cash flow formula looks like this:

DCF= ∑ CFt / (1+r)^t​​

CF = Cash flow

r = discount rate

t = time period

Discounted Cash Flow Example

Let’s put this into an example.

A potential investor in XYZ Retail wants to determine if they’ll see return on investment in three years if they invest $50 million now.

Let’s say XYZ’s cash flow (CF) for Year 1 is $20 million. Based on past performance, we calculate that future cash flow is expected to grow at a rate of 5% each year. So, for Year 2, CF will be $21 million and Year 3, CF will be $22.05 million.

Now, let’s say the WACC for XYZ Retail is calculated to be 4%, meaning 0.04 will be our discount rate (r).

Plugging it into the equation, we find:

DCF = 19,230,769.23 + 19,415,680.47 + 19,601,742.37

DCF = $58,248,192.07

In this case, the investor may see a return on their investment of $50 million in three years. However, it is very important to remember that DCF relies heavily on forecasting, meaning it is not going to be 100% accurate — or a 100% guarantee of a company’s future value.

Recommended: Net Operating Working Capital

Managing Cash Flow Problems

When handling business cash management, many companies experience cash flow hiccups. Frequently tracking and analyzing your finances can help you anticipate challenges and create proactive solutions. Here are five tips on how to better manage cash flow in your business:

Using Accounting Software

While calculating cash flow by hand is great, accounting software can help you keep a closer eye on where money is coming from and going to. Accounting programs can create invoices and track outstanding ones; they can also automatically break down expenses compared to actual cash brought in each month.

Hiring a Bookkeeper

A bookkeeper or accountant can bring to this the human touch that accounting software can’t. For instance, they can analyze the information, then break down the data into layman’s terms.

Small companies may not want or be able to invest in a full-time staff member, but some people do this on a part-time, freelance, or contract basis.

Refining Your Budget

Constantly analyze and refine your cash flow to ensure you have an effective operating budget in place. This can help businesses weather potential or anticipated downturns in business.

Increasing Revenue

Increasing revenue during a period of negative cash flow may require thinking outside of the box.

This might include running an alternative marketing campaign, expanding employee training, and finding creative ways to turn over inventory that isn’t selling well.

Applying for a Line of Credit

Depending on the nature of your cash flow issues and how long you expect them to last, applying for a business line of credit may be an option for getting an injection of capital. This is typically best used if you know what the problem and solution are and need a temporary fix.

Just like with any type of business financing, however, you’ll want to make sure you have a solid plan to repay your balance.

Other Important Financials to Know About

Your business’s cash flow statement is one of many critical financial snapshots reflecting your company’s health. However, there are other ways of monitoring financials, including balance sheets and income statements.

Balance Sheet

Your company’s balance sheet holds valuable information, including assets, liabilities, and details on owners/shareholders.

Assets include cash, inventory, and property. Liabilities include debt, expenses, and owners’/shareholders’ equity. This equity is particularly relevant if they’re paid retained earnings.

A balance sheet reveals important metrics such as your business’s debt-to-equity ratio and amount of working capital.

You typically need to provide your balance sheet any time you apply for business financing or pitch to new investors, along with other documents, so it’s a good idea to have this prepared for any such occasion.

Recommended: The Ultimate List of Financial Ratios

Income Statement

While your cash flow includes data from the business’s financing and investments, your income statement focuses solely on revenue and expenses over a set period. As a result, it can reveal trends in sales, production costs, and operating expenses.

Depending on the type of accounting used, the income statement may or may not be based on cash accounting.

For example, cash flow measures funds as they enter and leave your business accounts. But using an accrual accounting method, your income statement would reflect when orders are placed rather than paid for.

The Takeaway

Learning how to calculate cash flow is a vital step in understanding your finances. When combined with your balance sheet and income statement, cash flow can be used to keep track of profitable ventures and overspending. It’s wise to regularly review your cash flow to ensure everything is running smoothly.

Cash flow also plays a critical role in getting a small business loan because it shows lenders the company’s ability to repay debt. Strong, consistent cash flow indicates financial stability, reducing the risk for lenders.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What is an example of cash flow?

Cash flow refers to money moving in and out of your business. An example of cash flow is a small business receiving $10,000 in revenue from sales (inflow) while paying $4,000 for rent, $3,000 for salaries, and $2,000 for supplies (outflow) during a given month. The remaining $1,000 represents positive cash flow, which can be used for savings, investments, or loan repayments.

Does cash flow mean profit?

No, cash flow and profit are not the same. Cash flow refers to the money moving in and out of a business, while profit is what remains after all expenses are deducted from revenue. A business can have positive cash flow but still be unprofitable if expenses exceed revenue.

What is a healthy cash flow?

A healthy cash flow means that a business consistently generates more cash inflows than outflows, allowing it to cover operational expenses, repay debts, invest in growth, and maintain financial stability. It indicates strong liquidity and ensures the business can meet both short-term obligations and long-term financial goals without relying heavily on external financing.

Photo credit: iStock/PeopleImages

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOSMB-Q324-057

Yes, a business loan may impact your personal credit score. If you run a sole proprietorship or partnership, or if you personally guarantee the business account in any capacity, your personal credit score may be affected.

Read on to learn the different ways in which a business loan can affect your credit scores, and what you can do to keep business financing separate from your personal finances.

What Is Business Credit?

Business credit is based on your business’s credit history and is expressed in the form of business credit scores. Both your business credit profile and business credit scores give credit agencies, lenders, vendors, and suppliers an indication of how you handle your debts and your likelihood of paying them on time.

Building your business credit profile can pay off by giving you access to small business loans and other types of financing with favorable rates and terms.

How Does Business Credit Work?

In order to establish credit for your business, you need to first legally register it as a business entity. Once your business is registered, your business credit reports will be created when vendors, suppliers, or creditors report your company’s accounts and activity to a business credit bureau. This activity helps to generate the information that informs your business credit scores.

Difference Between Personal and Business Credit

While business and personal credit are two separate entities, the lines can sometimes get blurred.

Your personal credit score is linked to you through your social security number and uses information drawn from your personal credit reports. Your score reflects your funding and payment history, such as your use of credit cards or your record of paying off a student or personal loan, and can affect your access to future credit and what interest rates you pay. It may also be looked at by landlords and potential employers.

A business can have its own credit score, so long as it is a separate legal entity with a federal employer identification number (EIN). If you’re trying to get a business loan, some lenders may examine only your business credit history, which is reported by three major business credit bureaus: Experian, Equifax, and Dun & Bradstreet. Others may look at both your business and personal credit scores.

Recommended: Personal Loan vs Business Loan: Which Is Right for You?

What Types of Business Activities Can Affect Personal Credit?

In some cases, your business credit can affect your personal credit. Let’s take a closer look.

Business Credit Card Use

When you apply for a business credit card, the lender will typically perform a hard credit inquiry into your personal credit. Any hard credit pull can potentially lower your personal credit score by a few points, so you may see a small, temporary dip in your personal credit scores.

Once you’re using your business credit card, some activities will impact only your business credit, while others may affect both personal and business credit scores. It all depends on what the credit card issuer chooses to report and which credit agencies they choose to report to.

Some business credit card issuers report all of your account activity to the three major consumer credit bureaus (TransUnion, Equifax, and Experian), while others will only report negative information to those bureaus, such as being more than 30 days late on a payment.

Most Business Debt

Any type of business loan could impact your personal credit if you personally guarantee the business account or your social security number is linked to the debt. The lender will likely report a defaulted business loan to both the business and consumer credit bureaus in these cases.

How Can Business Loans Affect Personal Credit?

A business loan can affect your personal credit score in a variety of different situations.

If your business doesn’t have an EIN and the loan is tied to your social security number, for example, you would be personally liable for any debts if your business fails and is unable to repay them. Failure to make timely payments would affect your personal credit score.

Another scenario in which business loans can affect personal credit scores is when the borrower signs a personal guarantee. With a signed personal guarantee, both your credit score and your business’s credit score may be affected by missing payments. A personal guarantee also puts your personal assets at risk.

Recommended: Can Personal Loans Be Used to Start a Business?

5 Ways to Protect Personal Finances From Business Debt

If you’d prefer to keep your personal credit score separate from any business debts, there are some actions you can take to help make that happen. Below are some options you may want to look into.

1. Select the Right Business Structure

How your business is structured affects how banks and lenders interact with you. For example, if you’re a sole proprietor, it’s your name that will appear on every debt owed by your business, and your business and personal credit will be one and the same. Thus any late payments and defaults you accrue can have a negative effect on your personal finances.

If you want to sever ties, you would need to become a Limited Liability Company (LLC), S-corporation, or C-corporation. Each setup comes with a unique set of tax burdens and benefits, so when choosing a business structure, it can be a good idea to consult with a tax professional or business organization lawyer.

2. Open a Business Bank Account

Establishing a separate bank account for your business bank is one of the most important steps you can take to keep your company’s finances separate from your own.

When looking for the right bank to open a business checking account, you’ll want to consider services you need now and might need in the future (such cash flow management tools or merchant services), as well as fees for business accounts (which can be different from fees for personal accounts). Also, check the documentation requirements for opening a business bank account.

3. Consider Getting a Business Credit Card

It can be hard to get a business credit card right out the gate, especially if your credit rating is not excellent or close to excellent.

However, you may be able to find a business credit card that does not routinely report activity to the consumer credit reporting agents. Keep in mind, though, that you need to make all payments on time. Most major small business cards will report if you default on the card.

Another option may be to get a secured business credit card. A secured card uses money that you yourself deposit as collateral. This refundable deposit protects the card issuer in case of default.

Like a regular credit card, you make payments on any amount you use each month. After your business has proven to be financially responsible, you can request to upgrade to an unsecured business credit card.

4. Understand How Defaults Are Resolved

How a default is handled will depend on how the loan was set up. If you personally guarantee the loan, your lender may collect any collateral you put up to secure the loan, meaning you could lose your car or house. Likewise, all missed payments will show up in your personal payment history, which can lower your credit score and make it harder for you to get a personal loan or credit card.

If you or your partners did not personally guarantee the loan, then the business itself may be sued and any business assets you used to secure the loan might be seized. You can also expect fees, interest, and penalties to accumulate, as well as your business’s credit score to take a hit.

5. Communicate With Your Lender

When applying for a business loan, it can be a good idea to ask the lender whether it will look at your personal credit report and score before approving you for the loan. If so, this means the lender will be doing a hard credit check on your financial history, which could temporarily lower your score by several points.

It can also be smart to review any documents and contracts that accompany the business loan. If any of them request a personal guarantee and require your signature instead of your business’s, then you know you will be held personally liable for the loan or line of credit.

You may be able to challenge the personal guarantee, but if you do, the lender may deny your loan request or increase your interest rate, meaning you’ll pay more for the same product.

Personal Finances Affecting Business Loans

There are three scenarios where your personal finances might impact your ability to get a small business loan:

1.   Your business is structured as a sole proprietorship or partnership.

2.   Your business has a limited credit history.

3.   Your business has a low credit score.

If any of the above are true, the following may impact your ability to get a loan or your loan terms:

Personal Credit Score

If your personal credit score is low, it can have a negative impact on your business loan. It may not prevent you from getting approved, but it could keep you from getting strong loan terms.

Personal Debt

Personal debt also has the potential to lower your prospects for being granted a business loan. If you have a lot of debt in your name, it may give lenders enough of a reason to charge you high interest rates, fearing you may one day default on payments.

Recommended: No Money Down Business Loans

The Takeaway

Whether a business loan affects your personal credit depends on a few factors, including the type of loan you’re applying for, how you’re obtaining the credit, and your business structure.

Applying for a business loan or credit card can lead to a small hit to your personal credit score because of the hard inquiry from the lender. If you personally guarantee a business loan, your personal credit can also be affected. Finally, if you run a sole proprietorship or partnership, your personal credit could be affected by a business loan if you put your name on the loan documents.

However, business debts don’t impact personal credit if the company and the owner are two separate legal entities and the loan isn’t connected to your name or social security number.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

Are business loans based on personal credit?

In some cases, yes. A business loan will likely be based on your personal credit if your company is structured as a sole proprietor or partnership, if your business’s credit history is thin, or if your business has a low credit score.

Can a business loan show up on my personal credit report?

Yes, a business loan can show up on your personal credit report if you personally guarantee the loan or if the lender reports it to credit agencies. This typically occurs in cases of sole proprietorships or small businesses where personal and business finances are closely linked.

Do small business lenders check personal credit?

In some cases, yes. Lenders will likely check your personal credit if your business doesn’t have an Employer Identification Number (EIN), meaning the loan will be in your name, or if your business is new or has a low credit score.

Can a business loan affect getting a mortgage?

If your name is attached to the business loan in any way, then yes, it can affect your ability to get a mortgage.

When applying for a mortgage, your lender will likely look at your debt-to-income ratio. Your business loan (and any other debt you already have) combined with a new mortgage could potentially push you past the threshold that lenders like to see.

If your business is a separate entity, then a business loan will not likely impact your ability to get a mortgage.

Can my LLC affect my personal credit?

Yes, your LLC can affect your personal credit if you personally guarantee loans or credit for the business. In such cases, defaults or late payments could be reported on your personal credit report. However, if the LLC borrows without a personal guarantee, your personal credit may remain unaffected.

Photo credit: iStock/Rockaa

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOSMB-Q324-054