The Basics to Cash Flow Financing for Business Growth

As a business owner, you need to be able to have access to funds for various reasons. If you’ve been in business for some time and have a positive cash flow, you may be able to fund some of the things necessary to improve the business. However, there are times when you need a more substantial amount of money to expand such as buying a new location or buying all new equipment. In these times, you may need a loan. Traditional loans tend to take too long to fund, and you need something much quicker. Cash flow financing may be perfect for the growing business.


The Basics


Cash flow financing gives you quick access to money. It is usually only available to established and fairly successful businesses that can show gains and losses. Companies that benefit most from this type of financing can immediately start paying back the loan either in weekly, bi-weekly or monthly payments. This immediate repayment structure is the reason why they are typically only available to functioning and profitable businesses.


Types of Cash Flow Financing


Cash flow financing is a lot like traditional loans except the money is available reasonably fast. There are a few types that are popular among business owners:


Term Loans– Loans with a relatively low-interest rate (typically less than 10 percent) that have a repayment structure over a set schedule of time. Examples include student loans and mortgages. Term loans fund quicker than personal or business loans and depend on a variety of factors including credit score.


Credit Cards– Business owners usually have at least one dedicated credit card for things that come up. The interest rate is variable and can be higher, depending on credit score and utilization, but when looking for money quickly, a credit card might do the trick.


Line of Credit– Lines of credit are available to business owners depending again on creditworthiness and amount requested. It works much like a credit card except there is a lending agreement with the funding bank. The interest rate is lower than that offered by a credit card.


It is always a good sign when you need money to invest in growth opportunities for your business. Lenders can see that you are profitable and are more willing to lend you money, but it may take more time than you have. Cash flow financing is the fastest and most secure way to obtain the capital you need to expand or improve your business.

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