Faster Cash Flow Lending
All businesses, from the biggest on DOW JONES INDUSTRIAL AVERAGE (DJIA) to the smallest startup, worry about cash flow lenders. When they look for financing options, whether it is to borrow money to improve its marketing program or acquire another company, it will likely finance the advance through one of two primary funding methods: cash flow lenders or asset based. If they use the cash flow lenders financing process, the business owner or corporation borrows money based on the projected future cash flow lenders of the company.
When a financial institution grants funding, it is backed by the recipient’s personal or business cash flows. What this means, is that a company borrows money from expected revenues. In addition to historic cash flow lenders, credit ratings are very important in this form of financing. The advantage to this method is that a company can obtain financing much faster, as an appraisal of collateral is not required. This is how it works:
How Cash Flow Financing Works?
- Institutions underwrite cash flow-based funding by determining credit capacity.
- Typically, they will use earnings before interest, taxes, depreciation, and amortization (EBITDA) along with a credit multiplier to calculate this figure.
- This financing method enables lenders to account for any risk brought on by sector and economic cycles. During an economic downturn, many companies will see a decline in their EBITDA, while the risk multiplier used by the bank will also decline. The combination of these two declining numbers will reduce the available credit capacity for an organization.
- Cash-flow finances are better suited to companies that maintain high margins on their balance sheets or lack enough in hard assets to offer as collateral.
- Interest rates for these funds are typically higher than the alternative due to the lack of physical collateral that can be obtained by the lender in the event of default.
Traditional lenders, i.e. banks, deem businesses as “risky” if they have poor or bad credit. These businesses will find better consideration with online business financing sources. However, borrowers may want to carefully consider the types of funding they need and the lenders with whom they are contemplating doing business.
If you are considering obtaining cash advance lenders you should keep a few things in mind:
- Indirect or Direct Lender:
When you apply for a cash advance lenders, you may not realize that you are not dealing directly with the funder, but with a middle man commonly referred to as a “broker” or “lead generator.” This is an indirect lender—one who pools the funds of many funding sources, able to offer more varied options for cash-flow loans. A direct lender will transfer funds from the ultimate lender to the ultimate borrower.
- Higher Interest Rates: The repayment terms can be higher than other financing options.
- Unregulated Industry: Since the repayment terms are tied to future credit card sales and not a structured repayment schedule, these finances don’t fall under banking regulations. You need to do your homework and know with whom you are dealing when you look for cash advance funding.
You need to research any company with whom you want to do business. Here are some steps you can take:
- Look up the company with the Better Business Bureau. Look into their ratings and read their client feedback.
- Go to the funder’s website. Review their client feedback; go to their press room or media room to see how they position their activities.
- Review them in social media. Reviews on Facebook, Google+, Instagram or other platforms also lend insight into a business lending company.
If you’re speaking with a cash flow lender, direct or indirect, one question you should ask is: “do you file a UCC?” If they do file a UCC, their loans are secured, so you’ll have to pledge some form of collateral to receive your funding. If the lender does not file a UCC, then you will not be required to put down any assets for your cash. The most important reason to ask this question, however, is that the representative you’re speaking with should be familiar with the documentation; If they aren’t it may point to a less than honest funding model.
When running a small business, unforeseen circumstances can lead to unexpected expenses. A business cash-flow lender like Fast Capital 360 can help provide capital for those times when an extra influx is needed. To alleviate cash flow lenders issues, Fast Capital 360 funding can be used to provide temporary cash to keep your business operational. Fast Capital 360 is proud to provide cash-flow financing to small businesses across the U.S.
For more information on why Fast Capital 360 is the best choice for your small business and cash flow lending needs, contact us today at