Cash Flow Loans

Raise short term funding by borrowing against your expected cash flow

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Are you struggling with cash flow in your business? Perhaps a big client has not paid their bill or a contract has fallen through and you need funding quickly to help your business get back on its feet, or you require a cash boost to hire new staff or help you complete a vital business purchase.

Cash flow loans are a short-term business funding option that gives you access to finance quickly. As the name suggests, these loans are used by businesses to borrow against cash flow they are expecting to receive.

The key benefit of this type of funding is the immediacy of approval and funding, they should not be used as a long-term funding option.

As with all methods of business funding, there are pros and cons to cash flow loans that should be considered:

Advantages of Cash Flow Loans

  • With a fast turnaround on lending decisions, you can access funding very quickly – sometimes within hours of approval.
  • Repayment periods are a lot shorter, meaning you’re not locked into any long-term contract.
  • As the term is shorter, the overall interest payable is lower than a long-term loan.
  • Dependant on your lender’s terms, you may be able to save money by paying back the loan early.

Disadvantages of Cash Flow Loans

  • As with any short-term lending solution, the rate of interest paid is higher than other forms of funding.
  • Lenders will generally require a personal guarantee from the recipient of the loan, this could be your home.
  • Due to the fast turnaround on the loan, you may be subject to a nominal fee from the lender.
  • Missing repayments can get you into serious financial trouble – a cash flow loan should not be used to make repayments on other loans.

What Is a Cash Flow Loan?

A cash flow loan is a short-term funding option that gives businesses access to fast capital which can be used for anything. Cash flow loans are used to bridge cash flow issues, common reasons for application include:

  • A large client hasn’t paid.
  • A big client or contract has been lost.
  • Buying new premises or covering rent or service charge increases on existing.
  • Business purchase such as vehicle or equipment.
  • Unexpected breakdown of business equipment.
  • Seasonal downturn of business.
  • Management buyouts.
  • Hiring more staff.

How Do They Work?

Cash flow loans work by allowing businesses to borrow cash against their expected income, they are often used as a quicker alternative to business overdrafts or bank loans.

The USP of this short-term business funding solution is the quick turnaround and repayment terms (30 to 180 days dependant on the lender), because of this, they should only be used as a short-term solution.

What’s the Process of Receiving a Cash Flow Loan?

Following application, the lender will approve or deny your request for funding and the money can be transferred to your business account – this process can take just a few days or even hours dependant on the lender.

At the end of the repayment term, the loan with interest will be payable. In some cases, this will be paid back in a fixed regular amount across the agreed length of the contract.

Cash Flow Loans – FAQs

Given that start-ups have limited guaranteed cash flow, you are unlikely to be accepted for a cash flow loan as a start-up. However, there are a number of alternative business funding options available that are better suited to start-ups.

We work with a range of the UK’s best lenders to find the funding solution that’s right for you, we’re often able to source better interest rates than you would find going direct.

Yes, in almost every case the lender will run a check on you to ascertain your financial risk to them. If you have a low credit score, you may not be offered a loan or may be offered one with a higher interest rate.

In our experience, paying back a cash flow loan on time can help improve your credit score. On the other hand, if you miss a payment, your credit score could decrease.

If you’re handling the application yourself, it’s not a good idea to apply through lots of different lenders in a short period of time as this may harm your credit score.

One of the most popular credit check services is Equifax.

Dependant on the lender and your current financial situation, you can borrow anything from a couple of thousand to £100,000+.

Some lenders will allow you to repay early and save some money, however, others will charge an early repayment fee that can mean you end up paying more. When using Business Funding Shop, we’ll make sure you understand all the lender’s terms before going ahead.

APR (Annual Percentage Rate) is the amount of interest paid per year on the funds borrowed, as cash flow loans are a short-term solution, the APR is much higher than traditional forms of lending; the figure can also be bloated given that the repayment term is almost always less than 1 year. In any case, you should consult with an expert if you are unsure.

Taking the Confusion Out of Cash Flow Loans

At Business Funding Shop, we understand that when cash flow becomes an issue, you need funding fast. Whether you’re going through a quiet period, or need to make an unexpected purchase, we can help.

For more information on cash flow loans and whether they are the right fit for you, or to talk about other products that may be better suited – give one of our friendly team a call today on 0800 047 2389 or fill out a contact form and we’ll get back to you.