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What Is Cash Flow Lending?

Even when your business is on a growing spree, you’d find yourself in need of extra cash for covering your daily expenses like payroll, inventory and rent or for paying for your short-term projects which would increase your profits in long run. A cash flow which is uneven proves to be a big challenge for the small businesses and to deal with the issue they resort to cash flow lending.

What is cash flow lending?

In certain ways it is easier for you to understand such loan by explaining that what this loan isn’t, i.e. conventional bank loan.

  • Conventional loans: Normally, lending decisions are made by the banks considering several factors that include the credit history, the amount of money that has been invested in your business, what collateral you can offer, and cash flow and profit gains of your small business. These are used for determining your capacity of repaying the loan back. It can be termed like that they are determining the risk that they’re facing. It may be a process that consumes fair bit of time and is full of documentation and you may still be turned down on your loan.
  • Cash flow loans: Due to all the hassles of conventional loans, a new type of lenders got the opportunity who used a very few factors for determining one’s qualifications for borrowing, while exclusively concentrating on their cash flow rather than the business’s assets.

How cash flow lending works?

In case of cash flow lending, you are actually borrowing against the money that you’re expecting to get in future, and the decision is made by lender regarding whether you should be approved based on the projections as well as your previous performance or not. Computer algorithms are used by the lenders for factoring in all kinds of data, like transaction volume and frequency, seasonal sales, returning customer profits, expenses, and even the Yelp reviews.

What’s the plus?

If the business has enough sales for covering it up, it may even be possible for you to get approved for cash flow loans with not-so-great credit as well. These loans tend to have a pretty simple application process and the decision is made comparatively quickly, normally inside 24-72 hours. Based on who the lender is, it may be possible for you to get anywhere around $5000-$250,000. Yes, it’s a pretty reasonable choice and your business can benefit manifolds with cash flow lending.

Tammy Richards

Finance Expert, Writer, Entrepreneur

Tammy Richards is a passionate finance expert who is also a writer and business owner. With over 10 years of experience as a finance expert, Tammy wants... read more

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