Understanding the Cashflow Finance & Its Different Forms

When running a business, one should be aware of the monetary obligations and the overall financial status of the company, so that help can be sought whenever needed. Considering the economic volatility of the global markets, the small to mid-level enterprises and start-ups these days frequently end up in a financial crisis. The reason can be anything from pending invoices to cash flow deficiency or lack of funds. When faced with such dilemmas, a business owner should be prompt in seeking help through business financing. Now, there are multiple options; you can apply for secured business loans, invoice financing, equipment finance or cash flow finance.

The business financing choice should be as per your immediate requirement. Accordingly, you should also be aware of different financing products and what they can do to mitigate your financial crisis. On that note, this blog will help you understand cash flow finance, how it works, and its different forms.

What is Cash Flow Finance?

Cash flow is the money that goes in and out of a business, such as receipts from sales, payments, expenses and other transactions. You can use this cash flow to acquire funds to fulfil your business requirements. In cash flow finance, a company applies for a loan and secures it the existing and expected cash flow from the business.

This form of business financing is perfect for enterprises that although generating a lump sum amount from sales, lack the assets to peg as collateral against the loan. These are short-term loans that can be acquired through minimum documentation.

What are the features of Cash flow finance?

• You can access funds from $5000 to $300,000.
• If you want to apply for a higher amount then the lender might want to look into your overall financial status.
• The loan term is 3 months – 36 months; it is a short-term loan.
• The repayments are generally daily, weekly or fortnightly.
• You have to use the loan for business purpose only. 

What are the different forms of cash flow finance?

Business Overdraft

A business overdraft is a kind of cash flow finance, where the lender offers you a credit limit like a business credit card. You pay interest on the used amount only, and not the entire limit. For example, you have maximum credit limit of $50,000 and end up using only $30,000 for your business expenses, then you will pay the interest on $30,000 only.

Unsecured Business Loans

Unsecured business loan is also a form of cash flow finance, especially since it is not secured by any collateral. Like any other cash flow finance, you can secure unsecured business loan with minimum documentation and even with an average credit score. That’s because the lender assesses your last 6-12 months cashflow in the business to approve the loan and decide the terms and interest rates.

Conclusion

Hopefully, this blog was able to give you a clear view of cash flow finance. So, if are you seeking business financing solutions to strengthen your cash flow or invest in the business expansion? Then Broc Finance can help, facilitating the perfect financing solution for you. As one of the fastest growing finance brokers in Australia, they have an extensive network of credible private lenders who can solve your financial crisis instantly with favourable loan terms and rates.