Cash Flow Loans

In most cases, cash flow lending is used by small companies that don’t have the required assets to back up a loan, a track record of profitability, or a significant credit history. This means that the lender will often charge higher interest rates, while the origination fee is also likely to be higher. It’s always important to repay cash flow loans as quickly as possible, as they can become a real drain on your business’s finances if you start missing payments.​

Let’s look at a situation where cash flow lending could be an appropriate course of action. Imagine a seasonal business, such as a greetings cards company, that makes most of its annual sales from November to January. This company may experience low cash flows during the summer months, so to cover the cost of payroll and rent, they may consider taking out a cash flow loan. When cash flows kick in during the winter, they’ll repay the loan, with interest.