A cash flow business loan is a secured type of monetary loan support to businesses, in which repayments are made from the expected future earnings of the borrower. This type of business loan does not require any type of physical collateral like property or assets. The borrower’s business cash flow is used as collateral. It is most appropriate for a business that has no property, but a healthy ledger balance. Cash flow loans are basically used to manage business payroll obligations. Since no physical property is involved as collateral, the agreement that the financial institution will take control of the cash flow is made in the initial contract in case the business defaults. EBITDA is what most financial institutions use to underwrite cash flow loans. (The meaning of the acronym EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization.)
Like every other business loan, before approving a cash flow loan application, the financial institution will evaluate your business, especially in the areas of potential earnings and credit rating. Evaluating your business is important to the lender because it helps them make appropriate decisions regarding the loan application. Cash flow business loans can be a great help in financing a business, but only if proper and accurate precautions are observed before and after securing the loan.
Acquiring loans can be much easier for business than for personal use, but it is still important to understand when your business is in need of a loan and the most appropriate type of loan to take out. The inability of a business owner to determine what is best for their company may cost them their business. This is why this section outlines some of the best times to seek a cash flow loan.
Applying for a cash flow business loan be very important in a situation where your initial product line is not in season. You need funds to invest into other products, since you’re not going to close the business because your initial products are not trending at the moment.
Applying for a cash flow business loan can also be important for stocking your shelves with inventory for the next trending season. This is a common move in business. It is always important that you get more money to do more business and earn more profit in the next trending season.
Sometimes you may need a cash flow business loan to pay your employees and clear debt. One might say it’s not a good idea to use a loan to pay debt and workers’ salaries. But what if you don’t have enough money in your business account? Even if you do, you definitely won’t want to empty it out. Still, you must pay your employees and service your debts.
Cash flow is the sum total of the financial aspect of any company. It is important for a company to maintain a positive cash flow at all times. You’ve probably heard the popular adage that says, “No one is an island” and another one that says, “Money is used to make money.” These two adages are true. Your business can’t be an island. External support from friends, government, or private financial institutions is sometimes required to maintain balance.
Discussed below are some reasons why a cash flow business loan can be helpful.
Without a doubt, cash is business. A business without cash is as good as dead. Cash is used to keep up with everyday business expenses and to purchase important equipment that will keep the business ahead of its competitors. A cash flow business loan provides easy accessibility to cash for your business, enabling it to maintain a positive cash flow.
Cash flow business loans can help you keep up with debt. The financial support provided by the loan is used to cover employee salaries and minor debts the business may hold.
For a business to grow, it needs positive cash flow. A cash flow business loan will provide you with funds to expand your business, hire more workers to increase the production and efficiency, and boost market awareness.
One of the main benefits of a cash flow business loans is flexibility, in the sense that when your company has enough money at its disposal it will be easy to acquire new product lines that will increase sales. Every product has its own season – and when you have enough cash on hand, you can invest into whatever is trending at the moment.
Applying for a cash flow loan at different financial institutions can be somewhat stressful. You’ll have to provide paperwork about your business and attend meetings, some of which may require the presence of an attorney. All this for something that, in the end, might not be granted. But at Globelend Capital, getting a cash flow business loan can be done in less than 48 hours. You complete an online application in less than 10 minutes, your application is reviewed, and you get a quote within the next 24 hours. Globelend has remained the favorite of many small businesses over the years because it always delivers. Contact us today!