What is a Cash Flow Business Loan?
A cash flow loan is a type of borrowing that is used for the day-to-day operational cash flow of a small company. The loan is used to stabilize the business bank account balances to cover items like bills, expenses, payments for inventory, payroll, rent, and other everyday needs. Lenders offer these options so that businesses can get the cash for a wide range of operational needs. So, what type of Cash Flow Loan can you get?
6 Best Cash Flow Business Loan Options
Business Credit Cards
Business credit cards function the same as a personal credit card in that it a revolving credit line which a plastic card that is issued and can be used for both purchases and payments. Most businesses use business credit cards in conjunction with other loan products to sustain cash flow demands. A simple one-page application usually conducted online or by phone is all that is typically required from lenders. There are cases that more documentation is needed and requested when looking to borrow larger amounts of money
Rates: Interest rates starting at introductory 0% up to 28.99% APR
Terms: Revolving Line of Credit with no term limits
Fees: No Origination Fees
Payments: Payments are flexible and monthly
Credit Score Standards: Must have Excellent to good credit with deep credit history
Documentation: No Documents Required. One Page Application (larger amount requests may require more documentation)
Benefits and Best Uses of Business Credit Cards for Working Capital
Business Credit cards offer flexibility and access to money on demand. Credit Cards allow business owners to both purchase items as well as pay bills or invoices that can free up short term cash flow problems and is very convenient. There are no restrictions on the use of money with credit cards.
Short Term Loans for Cash Flow Financing
Short term loans provide a “lump sum” upfront, with a fixed payback amount over a short fixed term of time typically 6 to 18 months. Short term loans don’t typically require tax returns or other financial statements, just bank statements and a one-page application. Rates are based on a “factor cost” which is not principal & interest and costs more than traditional loans. The good news is that a short term loan requires very little paperwork and credit requirements are much more forgiving than traditional loans. You’re also going to find that a short term loan offers quick cash on hand when you’re in a pinch.
Rates: Factor rates range from 1.10 up to 1.45
Terms: 6 to 18 months in duration
Fees: Origination Fees 1% up to 5%
Payments: Weekly, Bi-Weekly, Monthly, and in some cases daily Monday-Friday
Credit Score Standards: Poor to Excellent credit accepted
Special Features: Approval to funding can be same day to 24 hours
Documentation: Reduced or low Documentation. A 1-page application and 3 months bank statements required
Benefits and Best Uses of Short Term Loans
A short term loan costs more than traditional loans. The rates are higher, shorter terms, and fees are more but can come in handy for the company that needs cash flow loans and can’t get approved for more traditional loan products. Short term loan options offer relief for business owners that may have trouble with the bank application process or cash flow lenders that have strict requirements.
Merchant Cash Advance for Cash Flow Business Financing
Merchant Cash Advances (known as a Purchase of Future Sales Agreements or an MCA) are an advance of a “lump sum” of money to a business owner with a discounted purchase price (aka specified amount) to payback. The advance is repaid by having lenders take a fixed percentage of future credit card sales batches until the payback amount is paid back in full. There is no term limit with advances as the fixed back percentage never changes. The time frame to pay back depends on the volumes of future credit card sales. The only documentation required for an MCA is a one-page application, 3 months bank statements, and 3 months merchant processing statements. When it comes to cash flow finance options that aren’t too strict, an MCA is a sound option.
Rates: 1.15% up to 1.45% factor rates
Terms: Estimated payback periods are 6 to 18 months with no set term limit
Fees: Origination Fees 1% to 3%
Payments: Fixed percentage Splits from future credit card batches
Credit Score Standards: All credit types considered from Poor to Excellent
Documentation: Reduced Documentation. 1-page application, 3 months bank statements, and 3 months of merchant processing statements.
Benefits and best uses of Merchant Cash Advance (MCAs)
An MCA costs more than other options offered by lenders — with higher rates and fees but the flexibility of repayment really helps businesses that fluctuate in sales like seasonal businesses. In addition, the MCA has limited documentation needed. There are no limitations for the use of money and can be used for a variety of different purposes but a majority of money is cash flow needs.
Business Cash Advance for Cash Flow Business Financing
Business Cash Advances, also known as a Purchase of Future Sales Agreements is just like an MCA. What is different about a cash advance is that it’s repaid by taking a fixed percentage of future overall sales which is different than an MCA which takes a percentage of future credit card sales. Payments are collected by a fixed daily or weekly payment deducted from a business bank account which is based on the fixed percentage of future sales. At the conclusion of every month, if the fixed payments taken are more than the set future percentage of sales than a refund back to the merchant can occur. There is no term limit with advances as the fixed payback percentage never changes but sales do so there’s no term limit because of that fact. The time frame to pay back depends on the volumes of future overall sales. Business cash advance documentation is limited to a 1-page application and 3 months’ bank statements. When it comes down to financing, cash flow is extremely flexible with a BCA.
Rates: 1.10% up to 1.45% Factor Rates
Terms: No term limits
Fees: Origination Fees are typically 1% to 3%
Payments: Fixed ACH payments are weekly or daily Monday-Friday
Credit Score Standards: Poor to Excellent is considered
Documentation: Low Documentation. 1-page Application and 3 months bank statements are all that is required.
Benefits and Best Uses of Business Cash Advance
Business Cash Advances costs are higher than those of traditional loans, but when credit and documentation are an issue. A business cash advance can be a great solution.
Invoice Financing as Cash Flow Loans
Invoice financing, also known as “Accounts Receivable Financing” or “Invoice Factoring” is a type of financing that allows business owners to get cash quickly from invoices that they would otherwise be waiting for 30, 60 or even 90 days or more, depending on invoice terms, to receive payment from customers/clients.
This type of financing allows you to get an advance of up to 95% percent of purchase orders or outstanding invoices from your customers. A finance company will advance a set amount of the unpaid invoice to the business owner and then collect directly from the client or customer for the unpaid portion. The credit approval is directed to the customer/client and not the business owner so there is little documentation required other than an application, Accounts receivable report, and contact information of the companies you invoice on a regular basis.
Rates: Factor Rates are 1.50% to 2.75% of the invoice amount
Fees: Monthly service fees which are based on the number of invoices
Credit Score Standards: Companies that are invoiced will be credit checked. The credit of Business owner not needed or reviewed.
Documentation: Low Documentation. 1-page application accounts receivable aging report, and clients contact information list all companies you want to advance invoices
Benefits and Best Uses of Invoice Factoring
Invoice financing provides money faster than most other loan products which are usually essential when the use of money is cash flow. The costs are lower than that of other cash flow loans and require no credit check of business owners and limited documentation. Invoice factoring is a cash flow lifesaver and the go-to financing product cash flow. The only issue is some businesses don’t qualify because they don’t invoice clients or customers.
Business Line of Credit for Cash Flow Financing
A business line of credit operates similarly to that of a credit card in that you can draw money off the line at any time. You are charged a principal & interest rate which is cheaper than that of other loan products and credit cards. The business line of credit does have a max limit based on approval. More documentation is required and approval is more difficult but the credit limits are much larger than credit cards.
Credit Limits: $10,000 up to $1 million plus
Rates: Interest Rates start at Prime plus 1% (as of 2020 that’s around 6%)
Fees: Application fee starting at $250
Credit Score Standards: Good to Excellent credit required
Documentation: 1-page application, Business Tax returns, 3 to 6-month business bank statements. Additional documentation may be required depending on the industry.
Benefits and Best Uses of Business Line of Credit
Flexibility is the number one reason business owners love business lines of credit as you can draw cash at any time up to your credit limit and you only pay interest based on your current balance. The rates and fees are also low compared to other loan products.
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Frequently Asked Questions
What are the Benefits of a Cash Flow Business Loan?
It is essential that all successful businesses have some type of credit facility available for any type of cash flow loans or emergencies that may arise. Business is ever-changing and most businesses are not spared the occasional cash crunch so having a cash flow loan is essential to a smooth operating business. Line of credit options over revolving “loans in cash” that business owners can take advantage of. While other options may offer quick and easy loans for cash that small businesses can use as an opportunity for working capital, renovations, or any other company needs.
Are Cash Flow Loans difficult to obtain?
The short answer is No. In 2020, there are many financing options and loans to choose from that can offer funding in a pinch. Even if you have challenging issues such as credit, time in business, and other concerns you still may be able to find cash flow loans that are a suitable solution. The key is to get approved for one of these products BEFORE you need it. Don’t wait until it’s too late. Have a cash flow loan option available at all times in your business life ready to go for use. Online lenders like us here at AdvancePoint Capital offer various short term loan options, lines of credit, and even credit card options that are perfect for those with less than stellar credit score.
Can I qualify for a cash flow loan if I have bad credit?
Yes, you can get approved for a cash flow loan with bad credit. Your options may be limited and the rates, costs, and terms may be affected by how bad your credit is. Invoice financing does not look at business credit at all so that may be an attractive option if you are that type of company that invoices customers on a regular basis. Cash flow loans can be forgiving for those struggling with poor credit, but it’ still worth delving over all of your options. The better your credit, the more loans you’ll be eligible for. So, even if you’re struggling with poor credit it’s still worth boosting if you’re looking for more freedom with online lenders when it comes to various loans.
Can I get Cash Flow Loan with No-Docs?
With the exception of a business credit card, the short answer is no. To be approved for cash flow loans, you will be required at the minimum at least a reduced amount of documentation so always keep your records up to date and use software programs like QuickBooks to manage your bookkeeping. While many cash flow loans are extremely forgiving, there is still some documentation required for nearly every option.
Can I get a cash flow loan if I am a start-up business?
The short answer is no, you cannot get a start-up loan without showing a history of revenue and your ability to manage cash flow through the current business bank statements. Former business ownership experience in prior businesses will not help you. Cash flow loans require some proof of progress or success.
Advice, Tips, Warning’s about a Cash Flow Loan
Like any financing product, you must still ask the question of why you need cash flow loans to fix your company’s issues. Is your cash flow problems short term? Was this a one- time special circumstance emergency or will your cash flow problems continue long term? Will your company always need a credit facility as it’s just the nature of your industry?
Consider the questions above when choosing the cash flow loan solution because the answers to those questions are not the same loan product to solve your cash flow concerns. Work with a company that has a large product line that can offer you as many choices as possible. When looking over cash flow loans, there’s always a solution that will work. As we always say at AdvancePoint Capital, compare, shop and you will always save!
How to Apply for a Cash Flow Loan?
We at AdvancePoint Capital can assist you in finding the cash flow loans you need. We offer an easy cash flow loan experience that our customers love which is fast, has a streamlined process, and high approval rates that come from working with us.
Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your cash!
The fast, convenient and straightforward way to get the money you need for your business – now!
Get your Quote Today by filling out our simple form.