Cashflow Lending
What is Cashflow Lending?
Cashflow lending is a short-term financing option designed to bridge temporary cash flow gaps. It provides businesses with a quick influx of funds based on their expected future sales or receivables.
Types of Cashflow Loans:
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Invoice financing: Receives an advance on outstanding invoices, minus a fee.
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Debtor finance: Similar to invoice financing, but focuses on a broader range of receivables.
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Merchant cash advances: Provides a lump sum advance based on projected future credit card sales.
How Does it Work?
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Apply for a cashflow loan: The lender assesses your business financials and expected future sales.
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Receive funding: If approved, you receive a loan amount based on your receivables.
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Repay the loan: Repayment typically occurs within a short timeframe (weeks or months), often with interest calculated on the outstanding loan amount.
Benefits of Cashflow Lending:
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Fast access to funds: Quickly address short-term financial obligations and keep your business running smoothly.
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Improved cash flow: Bridge the gap between expenses and incoming revenue, preventing disruptions.
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No property security required: Unlike traditional loans, cashflow loans are often unsecured and based on business performance.
Important Considerations:
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Higher interest rates: Cashflow loans typically carry higher interest rates compared to traditional business loans.
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Debt burden: Careful management is crucial to avoid falling into a cycle of debt due to recurring loan needs.
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Repayment pressure: Short repayment terms can strain your cash flow if not carefully planned for.
Signs You Need Cashflow Lending:
Here are some scenarios where cashflow lending can be helpful:
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Seasonal fluctuations in sales: Bridge the gap between lower sales periods and maintain operational costs.
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Unexpected expenses: Cover unforeseen costs like equipment repair or emergency supplies.
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Inventory purchase or expansion: Finance new inventory purchases to meet increased demand.
How a Finance Broker Can Help?
A finance broker can be your partner in navigating cashflow lending:
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Matching needs with solutions: Brokers assess your financial situation and recommend suitable cashflow lending options based on your specific needs.
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Competitive rates: They leverage their relationships with lenders to secure favorable interest rates and terms.
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Streamlined application: Brokers guide you through the application process, simplifying paperwork.
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Negotiation: Brokers negotiate terms and fees on your behalf, ensuring you get the best deal possible.
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Long-term planning: While addressing immediate needs, brokers can also discuss long-term financial strategies to improve cash flow management.
FAQs (Frequently Asked Questions)
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How quickly can I access cash with a cashflow loan? The approval process is often faster than traditional loans, with funding potentially available within days.
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What are the different repayment options for cashflow loans? Repayment options vary depending on the lender, but typically involve daily or weekly installments based on a percentage of your sales.
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What alternatives are there to cashflow lending? Consider business lines of credit, invoice factoring, or extending payment terms with suppliers.
Disclaimer: This information is intended for general informational purposes only and does not constitute financial or legal advice. Please consult with our finance brokers and a lawyer specialising in SMSFs before making any investment decisions.