A business cash flow loan can be an ideal solution for businesses, and for a business that can rely on its cash flow in the near future, they just make sense. Not all cash problems for businesses are the same. Sometimes, a short-term fix is all that’s needed without involving banks and credit checks.
What is a short-term cash flow loan?
Cash flow loans are short-term loans that are often sought out by small businesses.
They’re a type of loan that can be unsecured, which makes them a good solution for a business that doesn’t have a strong credit history to show, nor assets to offer as security. Short-term cash flow loans are best used for cash injections that can be paid back in the near future. This is often from an increase in the business cash flow, thus their given name.
A business might take out a cash flow loan to pay staff and invoices, or it might be used to buy assets and secure further cash flow. This means that the debt can be paid off thanks to the boost provided by the cash flow loan. Terms can be as short as a few months, and rarely exceed one year. When it’s suspected (or outright known) that a bank won’t provide a short-term loan due to too much perceived risk, lenders offering short-term business cash flow loans are often considered the next best option.
Am I eligible for a short-term business cash flow loan?
Your eligibility for a cash flow loan depends on the lender in question, and how your business appears to them. Having no long-term credit history or a lack of tangible assets isn’t necessarily a barrier to this type of loan. Often, you only need to have a healthy image of future profits to prove that you can repay your debt.
However, cash flow finance lenders won’t simply give to borrowers without a second glance. They will still look at the performance of your business and gauge how likely it is that you will indeed have the future revenue to repay them. It could be that the business has negative cash flow at the time of approaching the lender, but is making clear moves and investments that will serve to grow revenue in the near future.
Although you can secure a cash flow loan without any business security, lenders may require a personal guarantee to ultimately fall back on if things go awry. This means a company’s director making a legal promise to pay off the loan with their personal finances if the business fails to make the predicted revenue. This is because the lender needs to mitigate risk somewhere, and a personal guarantee is the only option left if not demanding security from the business itself.
Lenders may have their own requirements by which they operate. They might only consider businesses that have been operating for a certain amount of time, and others might require a minimum credit score. Gaining professional help with finding the best short-term loan lender is essential for finding the best and most appropriate deal for your business. This ensures you’re not borrowing on unsuitable terms and can safely repay the borrowed amount plus interest.
Trying to go off guesswork can lead into even more debt down the road. Not all business leaders are finance experts, and just a little guidance can make all the difference.
Examples of cash flow lending
Cash flow lending might be sought as an option for a number of reasons. Businesses suffering a lapse in their finances might need the short-term loan to cover an unexpected rough patch. By borrowing a small amount, businesses may get everything they need to avoid having to free up cash in other ways such as selling assets or cutting spending.
Alternatively, it might be that a business is otherwise healthy but needs a cash injection to help them through seasonality or market changes that impact their revenue. For example, a retailer might take out a short-term business cash flow loan in order to buy stock, equipment like tills and shelves, and pay staff while it sets up a new business location. As business gets off the ground in the ensuing months, the revenue made from its success can be used to pay back the lender (plus interest). This is ideally how a cash flow loan works out: it’s simple and straightforward, and paid back naturally using business profits in a short space of time.
How to find the right business cash flow loan?
Choosing the right loan requires choosing the right lender for your business, one with fair terms that you can meet.
With so many lenders on the market now available, how do you whittle down to just one? Business Finance House helps guide businesses to their most appropriate funding source. Our expert knowledge can demystify lending and help you find the right lender for you in no time. Our deep network of trustworthy lenders allows us to give you a rich range of options. If you need short-term finance for any reason, speak with our team and let us take a clear picture of your business.
To find out more about how to get a short term business loan, our business Loans options in Liverpool, our business loans in Cheshire, or our nationwide business loans, contact us today.
