If you are a small business entrepreneur, BORROWING money from traditional and alternative MONEY LENDER to assist the business cash flow is always a part of your operation. Some of the reason for business loan is for expansion, to pay off miscellaneous expenses, to pay additional inventory orders or to purchase or repair business equipment. For all of these purposes, a cash flow loan can be a suitable answer for your financial needs. Cash flow loan is an alternative loan system. They are not like the traditional loans offered by banking institutions. Bank loans approval are normally based on several factors such as your credit history and rating, amount of investment you’ve placed on the business, the collateral you can offer for the loan, and the ratio of your businesses income and expenses. Basically, these factors are used to determine your capability to pay back the loan. Cash flow loan was perceived to give borrowers a little more leeway when applying for a loan. The general difference is that cash flow loans have lesser factors that lenders use to determine the feasibility of your loan.
How Does Cash Flow Loan Work
As the term connotes, the main factor of the loan approval is the analysis of what your future sales would be like and the lender will make his decision based on the sales projection that you will present to them. The lender will of course also consider your businesses past sales performances. These lenders usually used some kind of software algorithms where they feed in all the necessary sales data and come up with projected future sales. If the result is a convincing factor, then in all probability, your loan will be approved.
Repayment terms for this kind of loan usually vary. With some, the loan is paid back via the businesses percentage of the sales until the balance is paid off. Other requires the borrower to pay back the loan via installment within a pre-determined number of months or years, depending on the loan agreement. The only drawback (again) for this type of loan is the very high interest it incurs.