A Quick Guide to Cash-Flow Loans
Steady cash flow is one of the most important factors in keeping your business afloat, but did you know it is also a helpful tool for getting loans? This article shows how to get a cash-flow loan, what it’s good for, and the pros and cons.
How a Cash-Flow Loan Works
A lending institution looks at your company’s banking and credit statements to understand your level of cash flow. The lender does not worry so much about your credit. The loan is generally unsecured, so it does not require collateral. The lender also runs your credit and checks your revenue for the previous three to six months.
The lender ensures that you have experienced no disqualifying incidents. Such incidents might include bankruptcy or loan default. If all things are in order, you can get a loan that ranges from three to 60 months. You repay by bank account remittance or remittance of daily credit card transactions.
When To Use a Cash-Flow Loan
Cash-flow loans help you fill a variety of needs quickly. For example, you can increase your advertising and marketing budget to get the word out. This is especially useful when your product or service is hot, and you need to compete with a lot of newcomers.
If you run into an emergency and need to cover a substantial bill, a cash-flow loan can be a great way to get the necessary funds. The same holds true for an expensive tax obligation or when you struggle to meet payroll.
A cash-flow loan can boost working capital to avoid falling behind on other obligations. Late fees and damaged relationships may be more costly to you than the interest on the loan. The loan can help you to expand at a reasonable time when you don’t otherwise have the capital to do so.
Disadvantages and Advantages of Cash-Flow Loans
Cash-flow loans tend to have shorter terms than conventional loans. The rates and fees are usually higher, making this a more expensive loan than traditional options. While you do not generally offer collateral, a lien is placed on the business for this loan type.
Still, there are many advantages to cash-flow loans. Approval doesn’t require excellent credit or high profitability. Not much documentation is needed to apply for the loan, and the lack of collateral required is good for businesses without many assets. The loans are typically financed quickly, even as short as one to five days.
Try not to allow cash flow to become a pain point for your company. Understand cash-flow loans and take advantage of them as needed.