Whether your business is a Fortune 100 company or you started only a few years ago, every business could use additional funding at one point in time.

Cash flow loans enable you to borrow money from expected revenues you anticipate earning in the future. Essentially, this means the loan is secured by your business’s future cash flow and not an additional piece of collateral.

A cash flow loan is right for your business if:

  • You need quick access to working capital.
  • You are looking to avoid pledging collateral.
  • Your credit history is fair but not great.

How Does a Cash Flow Loan Work?

As we described in the overview, cash flow loans basically allow you to borrow money you expect to earn in the future. If your business has the sales numbers to qualify, your chances of securing a cash flow loan will improve, even if your credit score is below 580.

One of the key benefits that cash flow loans feature is how quickly your business can receive your funds.

For example, if you applied for a cash flow loan through an online lender, their approval decision would be based on your future projections as well as your past performance. The application process is simple and straightforward, asking you to just fill out basic information about your business and yourself. After receiving an approval decision within hours, you could see the funds in your account as soon as the same day.

Depending upon your terms, your cash flow loan could be repaid one of two ways.

The first option is more open and flexible, as it allows you to pay back your loan as a percentage of the sales you generate, as you make them.

The second option offers consistent payment installments where your business pays a fixed amount over a set period of time.

The 4 Most Common Types of Cash Flow Loans

One of the best features of a cash flow loan is how quickly they are able to fund. While there are a variety of cash flow loan products with their own rates, terms, and loan amount ranges, their speed of funding is what connects them. Depending on the needs of your business, each product has its own strengths and weaknesses.

Let’s take a look at the top 4 cash flow loans:

Business Line of Credit

This loan type allows you to borrow up to a maximum credit limit and only pay interest on the capital you borrowed. You are able to withdraw the amount of funding your business needs and will only pay interest on the funds that you use.

  • Loan Amount: $5,000 – $500,000
  • Loan Term: 6 months – 3 years
  • Interest Rate: Starting at 8%
  • Speed of Funding: Fast as 1 day


Short-Term Loan

The perfect loan to capitalize on your immediate projects. A short-term loan provides your company with working capital that can be used to fund renovations, seasonal preparations or fulfilling large purchase orders.

  • Loan Amount: $3,000 – $500,000
  • Loan Term: 3 – 18 months
  • Interest Rate: Starting at 10%
  • Speed of Funding: Fast as same day


Invoice Financing

Turn unpaid invoices into capital. Get back to running your business by bridging the gap and shortening your accounts receivable terms.

  • Advance Amount: Up to 80% of receivables
  • Estimated Repayment Term: 3 months – 18 months
  • Factor Rate: Starting at 1.05
  • Speed of Funding: Fast as same day


Merchant Cash Advances

A merchant cash advance (MCA) is funding provided by your lender in exchange for a portion of your credit or debit card sales. This is a great option for businesses looking for fast and easy funding with flexible qualifications.

  • Advance Amount: $3,000 – $500,000
  • Estimated Repayment Term: 3 months – 18 months
  • Factor Rate: Starting at 1.14
  • Speed of Funding: Fast as same day


How Can a Cash Flow Loan Benefit My Business?

Now that you’ve seen and gotten a better understanding of the different varieties of cash flow loans, you may still be wondering how advantageous this funding would be for your business.

Essentially, there are two main scenarios where a cash flow loan would greatly assist you.


You can never be entirely protected from business problems. Regardless of how extensive your plans are, things come up, often during the absolute worst times. While we thoroughly recommend every business have an emergency expense fund, sometimes that is not enough.

A cash flow loan can help cover a seasonal gap in your sales or aid in your recovery from a more severe disaster. With the support of one of the top four cash flow loans, you can get through the worst moments in your businesses without interruption.


On the flip side of the coin, sometimes incredible chances to improve your company come along when you don’t have enough available working capital. With the possibility of increasing your revenues by expanding your product line or branching out into a new market, cash flow loans give you the ability to seize the moment.

In the next section, we’ll learn more about the specific types of opportunities where a cash flow loan can help.

Let’s take a look at some of the reasons why you would need a cash flow loan and how it can be used.

Increasing Inventory

Perhaps the most common use of any cash flow loan is to increase business inventory. You are able to address any gaps in your product line, buy in bulk at a discount, or bolster your supplies in advance of a major customer shipment.

Upgrading Your Equipment

Whether you need to fix a failing oven or add a new machine to your company, cash flow loans provide access to the funds required to succeed.

Spotty Seasonal Sales

Even if your business is seasonal, bills and other expenses are not. A cash flow loan can offer your business the support to carry you through seasonal lulls until the calendar turns in your favor.

Hiring Additional Employees

Growing your business often means adding more people to your team. When you need additional team members but don’t have immediate access to the funds required to do so, a cash flow loan can help expedite your employee expansion without slowing your growth.

Opening a New Location

Speaking of expansion, adding another location to your business can come with a significant price tag. It’s common for owners to finance these major business moves, making a cash flow loan a perfect option to capitalize on your company’s momentum.

The Cost of a Cash Flow Loan

Due to cash flow lenders expediting the review and approval process in order to provide quick and easy access to the funds you need, these loans can include higher interest rates and other fees.

Aside from potentially higher-interest rates, let’s review some of the other costs of a cash flow loan.

Cash Flow Loan Fees

The majority of lenders charge an average origination fee of 1 to 3% which is deducted from the borrowed amount. This fee is typically used to cover processing and origination costs needed to fulfill your loan.

You can also incur fees for any late payments or if there are insufficient funds to complete a scheduled payment.

Cash Flow Automatic Payments

One of the conveniences of online banking is the ability to schedule and control automatic payments.

Just as you would experience with automatic bill pay through your bank, the lender will set up automatic payments which allow you to pay back your loan. Automatic payments can be handled as either a fixed payment or as a percentage of your daily sales.

Before selecting automatic payments, be sure you have a full understanding of your business’s daily and weekly sales averages. This will help you confidently communicate with your lender on the percentage or fixed payment you are comfortable with paying automatically.

Liens and Personal Guarantees

While cash flow loans can be described as an unsecured loan, you may still need to provide some form of collateral. This assurance lowers the overall risk to the lender in case you were to default on your loan.

With cash flow loans, it is common for lenders to place a lien against your business. A general lien is not applied to one specific asset. If money is owed to a lender, the funds could come from the sale of a car, home, or other property owned by the debtor.

In most cases, lenders will also ask you to sign a personal guarantee, meaning that if your business is unable to fulfill the balance of the loan, you are personally accountable.

Knowing When a Cash Flow Loan is Right for You

When you need fast access to working capital and your credit history is fair, but not great, a cash flow loan could be the best solution for your business. With a variety of options available, you’re able to find the financing that best aligns with your company’s needs.

Of course, finding the right match for you comes down to studying how each option can benefit your business. Whether you’re looking at expanding your product offerings or covering a gap in your seasonal sales, there is a cash flow loan to meet your business’s needs.

Now that you’ve answered all the questions we’ve asked you to consider, you should have a clear idea of how to use your funds. Getting the most from your cash flow loan is important and now you’re ready to capitalize on the opportunities ahead.


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