Cash flow is, in many ways, the lifeblood of a successful business. On paper, your business might be the most successful ever, but until that cash is in your hands and available to use, it is not a real asset. Promised revenue won't stop bills and other running costs being due, and this is the undoing of so many businesses. This is where cash flow finance can save you.
What is cash flow finance?
A short-term financial fix, cash flow finance is when a lender offers finance based on the revenue your business expects to earn in the future. It essentially allows you to use your future revenue, now.
The short time periods of these loans are important to understand. They are there to help immediate and short-term problems and are in no way a solution to long-term or systemic cash flow problems. Business owners need to get to grips with proper cash flow forecasting to ensure their business operates effectively, but cash flow finance is a quick fix to occasional issues that all businesses suffer.
Cash flow loans (and other forms of cash flow finance) are usually very quick to obtain and are usually paid back in one to six months. Once obtained you will start to pay back the money immediately, with interest, over this short period. Always examine the lender's terms and conditions on schedules and payments before taking the finance.
Anything from a few thousand pounds up to hundreds of thousands of pounds is obtainable depending on whether you qualify.
Most lenders will undertake a credit check before offering a loan.
Why would I need cash flow finance?
No matter how good your financial planning is, there are going to be times where you have cashflow issues. You might have a series of unpaid invoices or be working on a long-term project that when delivered will be lucrative but right now isn't paying. While all this is going on, your staff need paying, your bills stack up and you need to run your business.
This is particularly common for small business as they grow customer base, and for companies that experience seasonal peaks to their incoming revenue.
Cash flow finance is also needed to make emergency payments such as vital repairs or to make quick investments that will aid your business development.
What are the interest rates on cash flow loans?
There will be different fees and interest rates available from different lenders so it is worth taking the time to research and shop around when looking for cash flow finance.
Because of their short-term nature, interest rates on cash flow loans tend to be higher than on other long-term finance options. This is because of the short repayment schedule. You must get to grips with the annual percentage rate (APR) on any loan you are considering if you want to get the best deal and want the best repayment schedule.
With some many products on the market, you need to take time to understand the interest rates, fees and other terms and conditions to make the most informed choices.
Where to find cash flow finance
It’s not hard to find cash flow finance. All major banks plus many general and specialist lenders will all have cash flow finance products available. In fact, the issue is not finding finance, it is finding the right options for your business.
You might want to consider a broker that will find you a range of cash flow finance options and help guide you through the best available.