Cash Flow Loans for Small Businesses

Contents

Why Clifton Private Finance?

We are financial experts specialising in sourcing asset finance for business purposes across the UK.

We can help you:

• Understand what kind of loans you're eligible for and how much you can borrow.

• Feel comfortable with how the process works and explain any costs.

On your behalf, we will:

• Compare rates across the entire market (from private lenders to high-street banks)

• Negotiate the best deal for your circumstances

• Guide you through the application process

• Make sure your application is completed as smoothly and stress-free as possible

Understanding What Cash Flow Loans for Small Businesses Are Available

For smaller companies, the need for available funds to pay a constant stream of outgoings will always be high on the priority list. Business owners looking to expand may not know the full range of cash flow loans for small businesses available on the market.  

All businesses need cash flow to thrive. When a business has sufficient capital, it has enough money to keep up with bills, repay debt, and invest in further expansion.  

When cash flow is negative, problems can start to occur, and the company runs the risk of losing control of bills, staff salaries being delayed, and further friction that can prevent the business from operating efficiently and developing in the long term.  

Thankfully, there are a number of financial products available in the market today designed specifically to help with cash flow - short-term funding that can help get you through today and towards a brighter tomorrow that you know is coming. 

Key Takeaways 

Need just the quick run down? Here it is: 

• Specialised cash flow finance for small businesses is available to help you bridge the gap of difficult financial period 
• Cash flow finance comes in many forms, from loans to ongoing lines of credit. 
• Cash flow finance tends to have higher interest rates and shorter repayment terms than standard loans but it is easy to apply for and can potentially provide more significant sums of cash.
• At Clifton Private Finance, our team of experts can help you secure the funding you need to empower your business's growth.

The Basic Business Loan 

Many business owners don’t realise the full range of options available to help with their cash flow and will immediately turn to a standard business loan.  

These may be secured with tangible assets as collateral, backed by a director's personal guarantee, or even an unsecured business loan obtained through a healthy credit history. 

While a standard business loan can help with any immediate cash flow problem, they aren’t necessarily made to cater to this purpose: 

• Slower application process 

• Smaller amounts available 

• Long-term repayments stretching far into the future 

• Early repayment fees 

Many companies need a more customised loan that takes their projected profits into account. 

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Specialist Cash Flow Loans 

A specialist cash flow loan for small businesses offers a structure that can fully accommodate your business’s needs.  

They are developed to consider any reliable known future income in your application. They may be obtained swiftly as specialist lenders can better understand the circumstances surrounding these loans. 

Cash flow loans can be arranged within 48 hours, and often even quicker, making them appropriate for businesses looking to secure much-needed capital. 

Cash flow loans are short-term loans designed to be repaid in a few short months. The interest rates are higher than a long-term bank loan, and there will be a set-up or arrangement fee as part of the process.  

These loans are typically secured or will at least require a personal guarantee. While this does mean you’re personally liable for the payment, it can also keep the loan’s interest rates affordable. 

Loan Comparisons 

Invoice Finance 

Invoice finance is a specific subset of cash flow finance designed to help B2B businesses bridge the gap between an invoice being raised and the payment from the client. 

For many business-facing companies, the period between a project being completed and the funds cleared in the bank can be difficult. Many invoices take a month or longer to process, and with multiple invoices coming through at different times, this can be difficult to scale.  

Invoice finance can be split into two different categories: 

• Discounting 

• Invoice factoring 

This finance product provides a way for a company to raise capital on the value of the outstanding invoices (known as accounts payable), helping with any current cash flow issues and easing a business’s financial burdens. 

Unlike other cash flow loans, invoice finance is backed by the accounts payable and requires no further personal guarantee from the directors. In this way, it can be considered a lower-risk alternative. 

Merchant Cash Advance 

For companies that get most of their income through credit or debit card transactions, merchant cash advance (MCA) offers a flexible solution to immediate cash flow problems. 

With an MCA, capital is provided in exchange for a percentage of future card transaction takings. Repayment of the sum is transparent and ebbs and flows in line with monthly income, making it a non-burdensome form of borrowing.  

When income is high, repayments are larger, and when months are right, repayments are scaled down accordingly. In this way, MCA doesn’t have a fixed term for borrowing and can be considered a line of credit style of finance, with a swift process for subsequent injections of capital if needed at a later date. 

Merchant cash advance is an excellent solution for B2C companies, such as shops, restaurants, and hotels.  

Lines of Credit 

Line of credit solutions have provided comprehensive cash flow finance for decades. Unlike a loan with set repayment terms, line of credit products are designed to be incredibly flexible and can be used throughout a company’s life. 

The two best-known lines of credit are: 

• Bank account overdraft facility 

• Credit cards 

Once in place, both function in a similar way, providing access to borrowing without the need for additional application. Repayments are flexible and there is no fixed term for ultimate return of the debt. 

The cost of this flexibility is high interest rates and, in some cases, regular fees. While overdrafts and credit cards can be excellent solutions for short-term cash flow needs, leaning on them regularly can become a burden for the business and result in expensive and unnecessary interest payments.  

You’ll need to manage your business’s finances efficiently to stay in control of your line of credit use. 

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Pros & Cons of Cash Flow Loans

Pros

+ Swift and Easy Application 

One of the key benefits of cash flow finance is being able to obtain it quickly and without a lengthy application process. Like other loans, credit history is checked and assessments are made by the lender’s underwriters, but these are undertaken swiftly and with the full understanding that a decision is needed as soon as possible. 

In most cases, the application process is completed within an hour and a decision is available within a working day. Cash is typically available within 48 hours of the initial application. 

+ Size of Loan 

Part of the application process will involve submitting your financial history and forecast. Consequently, the lender will be able to assess repayment viability against these figures and can make a decision regarding the size of the loan with that information in mind. This is especially relevant with different types of cash flow finance, for example, invoice finance, where the size of accounts payable is a significant factor in determining the funding available. 

+ Short Repayment Terms 

Cash flow finance is a short-term solution, so it should be repaid relatively swiftly using known future income. The advantage is that once the loan is cleared, your business can move on without any burden of repayment and with a positive mark in its credit score as a bonus. 

Cons

- The Guarantee 

Because of the higher risk of a cash flow loan for small businesses, lenders will typically as for a personal guarantee from the applicant. This will mean that you are personally liable for the loan if repayments are not made by the company. 

- Interest Rates and Fees 

Because of its short-term nature and higher lender risk, cash flow finance tends to have higher interest rates than other business loan products and typically comes with administrative fees. 

Applying for a Cash Flow Loan 

Getting a cash flow loan or other cash flow finance for your small business is easy. However, it is made even easier with a bit of preparation. Have the following ready before starting any application: 

• Full, up-to-date company details - Ensure you have the necessary paperwork confirming your company address and registration. 

• Company accounts - All cash flow finance options will want to see your company account history. 

• Financial forecast and supporting documentation - Cash flow finance is based on your knowledge that the money is coming in soon, so you need to be able to show this. Invoices, client contracts, and supporting historical evidence are all helpful in validating your figures. 

• Personal details - If you anticipate being asked for a personal guarantee, have your personal information to hand.

• Business plan - While cash flow finance is less likely to ask for a business plan than many other business loan types, it is always worth having an up-to-date version of your business plan ready to show potential lenders. 

How We Can Help 

At Clifton Private Finance, we have a team of experts ready to help you obtain the business finance you are after. We specialise in cash flow finance and can advise on all the latest products in the market. 

As a specialist finance broker, Clifton Private Finance can provide a clear picture of the options available to you. We will assess your specific set of circumstances and arrange a finance solution tailored to your needs.

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