There are times when any business needs a little extra cash—here’s what you need to know about cash flow loans.

Business Cash Flow Loans

Most small businesses experience an operating cash flow issue at some point in time. It could be that you sell on credit terms, and while you wait 30, 60 or even 90 days to be paid, your financial obligations don’t stop, leaving you in need of operating capital.

Or perhaps a critical piece of equipment fails unexpectedly. To get production back on track, you clean out your cash reserves, leaving you without any emergency funds. This isn’t ideal, considering you still have to meet payroll for the week and have a tax bill in need of payment.

In both scenarios, time is of the essence. A cash flow loan can be the bridge your business needs to stay solvent.

What Does Cash Flow Financing Mean?

With cash flow financing, you’re borrowing against future earnings. A lender will choose to fund—or not fund you— based on your future cash projections, as well as your past performance. As a result, less emphasis is placed on your business’s creditworthiness.

If your past sales and future projections meet the minimum requirements, your business may qualify for a cash flow loan even if your credit score is less than stellar. Because of these attributes, cash flow loans are well-suited for small companies that don’t have a long credit history or significant assets to back a loan.

The application process is relatively quick and painless. You’ll be asked to share basic information about your business, such as:

  • Seasonal sales
  • Business expenses
  • Returning customer revenue
  • Bank transaction frequency and volume

You’ll receive an approval decision within hours and could receive funding as soon as same day. This is in stark contrast to the traditional bank-backed loan application process, where applicants must meet strict eligibility requirements, fill out a stack of documentation and wait as long as 90 days for a final lending decision. In many cases, that decision is “no.”

In fact, according to the National Small Business Association, financing continues to be a challenge for small businesses, particularly at large banks where the number of small businesses relying on bank financing has hovered at just 15 percent.

How Are Small Business Cash Flow Loans Repaid?

Cash Flow loans are short-term, with typical repayment falling within the 3- to 18-month range.

How you repay the loan will depend on the financing type and the lender’s terms, but in general, cash flow financing is paid back in one of two ways.

Credit Card Holdbacks or Automated Fixed Payments

The balance is paid back in small increments with automatic payments drawn from the borrower on a daily or weekly basis. There are two ways to facilitate this type of repayment:

  • Lenders pull a percentage of your credit card sales each day
  • Or lenders draw a fixed payment from your checking account on a predetermined basis (daily or weekly)

What to Know Before You Apply

Since they differ from their traditional loan counterparts, it’s important to understand the dynamics of why cash flow financing commands higher interest rates and origination fees.

To gain a better understanding, let’s review the details of cash flow financing:


Unlike traditional bank-backed loans, unsecured cash flow loans aren’t collateralized by assets. For this reason, they are riskier for the lender. As a result, interest rates are higher than traditional bank loans.


In addition to higher interest rates, you may be subjected to additional cash flow financing fees, including an origination fee, service fee, late/insufficient fund fees or prepayment penalties.


Even though you don’t have to put up collateral for an unsecured cash flow loan or advance, the lender may require a personal guarantee. This means that if your business can’t pay back the loan, you will do so.

When to Consider Cash Flow Financing

Since cash flow financing carries these higher fees and generally requires swift repayment, it’s vital to use loan proceeds to finance projects that will help your business grow.

Common uses for cash flow financing include:

  • Capitalizing on a time-sensitive business opportunity (e.g., material discount)
  • Inventory, equipment or material investments
  • Peak season preparation
  • Adding an additional location
  • Hiring additional staff

To illustrate when a cash flow loan may be a good option for a small business, let’s review a typical scenario.

Cash Flow Loan Example

Moores Jewels is a jewelry manufacturer. The business is seasonal with the majority of its sales occurring between May and August when retailers are purchasing their Christmas inventory. As such, Moores Jewels’ cash flow margins are at its lowest in March and April.

Moores Jewels receives a large purchase order at the end of March. The problem is, the company does not have the material on hand to produce the jewelry and fulfill the order.

To cover the cost of material, Moores Jewels secures a cash flow advance. The business will repay the loan with the proceeds of the sale.

4 Types of Cash Flow Financing

As we just illustrated with the example above, cash flow loans and advances are examples of bridge financing. They are useful for companies that have temporary cash flow constraints and should not be considered for long-term financing needs, such as debt consolidation or commercial real estate financing.

If you determine that a cash flow loan is the best solution for you, we’ve outlined four popular options below, including a list of pros and cons for each product type:

Business Line of Credit


$5,000 – $500,000

Repayment Term

6 months – 3 years

Interest Rate

Starting at 8%

Speed of Funding

As fast as 1 day

What It Is

A business line of credit is comparable to a business credit card, but with higher limits and stricter repayment terms. Your lender authorizes a set amount of funds from which you can draw money from whenever you need. You pay interest only on the funds you borrow.

  • Use flexibly
  • Pay interest only on the funds you borrow
  • Build your credit
  • Collateral may be required
  • Can have costly fees
  • May have to re-submit paperwork to reuse funds

Short-Term Loans

Loan Amount

$3,000 – $500,000

Repayment Term

3 – 18 months

Interest Rate

Starting at 10%

Speed of Funding

As fast as same day

What It Is

Short-term loans are similar to traditional term loans, but are smaller in scale and have much shorter repayment schedules (18 months or less).

  • No long-term commitments
  • Limited paperwork
  • Fast approvals
  • Variety of uses
  • Can be expensive
  • Accelerated repayment schedule (daily or weekly)

Accounts Receivable Financing

Advance Amount

Up to 80% of receivables

Repayment Term

Until receivables are paid in full

Factor Rate

Starting at 1.02

Speed of Funding

As fast as same day

What It Is

Accounts receivable financing turns unpaid invoices into capital. Lenders charge a weekly fee until your customer pays off the financed invoice.

  • Near-immediate access to cash
  • Low qualification requirements
  • No collateral required
  • Clients’ bad credit could disqualify you
  • No guarantee of invoice collection
  • Recurring weekly fees

Merchant Cash Advance

Advance Amount

$3,000 – $500,000

Repayment Term

3 – 18 months

Factor Rate

Starting at 1.14

Speed of Funding

As fast as same day

What It Is

In Merchant Cash Advance financing, a lender gives you a set amount of cash upfront. You repay this advance plus their fees with a percentage of your sales.

  • Low qualification requirements
  • No collateral required
  • Can be expensive
  • Daily repayment

Choosing a Cash Flow Lender

As we covered, cash flow financing serves a specific set of financial needs. If you’re experiencing a cash flow shortfall, but you expect to receive an inflow of cash in the near future, this type of financing may be just what your business needs to see you through leaner times.

Though it can be challenging to qualify for a small business loan program from a traditional bank lender, there are many cash flow financing options available in the online lending space.

Before you complete an online loan application, do your due diligence on the online lender. Here are some steps we suggest you take:

Look for minimum requirements

Be aware of online lenders that do not require a minimum credit score and other minimum business requirements. This is a red flag for borrowers as these lenders typically charge a very high interest rate to make up for taking on high-risk borrowers.

Choose a lender with clear terms

When comparing online lenders, it’s important to review loan cost and terms. Reputable lenders will be forthcoming with this data. Before accepting a loan offer, be sure to have answers to the following questions:

  • What is the repayment amount?
  • What is the repayment term (daily, weekly or monthly)?
  • What fees (origination, late, insufficient funds, prepayment penalty) will be added to the loan amount?

See what their customers are saying

Look up the company on TrustPilot, Yelp and Glassdoor. By reviewing the company’s ratings and client feedback, you’ll have a sense of the kind of company you’d be working with.

There are many loan types available to you as a small business owner. For this reason, you shouldn’t be afraid to consult with a business advisor to identify the funding program and lenders that will produce the best business outcomes for your particular need.

When you’re looking for the best cash flow loan options, Fast Capital 360 can help. Through our simple, online application you can compare cash flow financing programs from the industry’s top lender’s all in one place.

We’ll pair you with an experienced business advisor, who will help you compare your offers and find the absolute best product for you and your unique funding needs. You can get in touch with one of our advisors by calling (800) 735-6107 or click here to chat with us directly.

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