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Cash Flow Loans Explained

There are many types of cash flow loans available to commercial businesses however we thought it might be worth explaining the different options. A cash flow loan in the traditional sense is a loan from a bank based on the performance of the business. Rather than securing the loan against bricks and mortar a multiple of the profitability is lent to the customer. These types of loans reached their peak in the run up to the credit crunch however are only starting to make somewhat of a recovery.

Whilst factoring , invoice discounting and even bank overdrafts are a form of cash flow loan they are different in that they are secured by other means. Factoring and invoice discounting facilities are secured against the debtor book and overdrafts are more often than not secured against bricks and mortar and even personal guarantees. Obviously it is possible to obtain a bank overdraft without security however you will probably know only token overdrafts are available from most banks without the benefit of tangible security

Cash flow lending was very prevalent in the acquisitions and mergers market  where significant sums were required to purchase a profitable business however there was very little security in terms of  property, findable debtor book or plant and machinery. A traditional asset based lender will lend cash against some all all of these tangible assets.

As with any financial institution the parameters for cash flow lending will vary greatly. An experienced commercial finance broker will have their finger on the pulse and will be able to help you find the most appropriate finance company. Don’t get too excited because we believe that this is still the most difficult area for funding and it will take time before the banks fully regain their confidence in this sector

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XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

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