A flexible credit line, also known as a revolving cash facility, is a short-term financing solution for active businesses. The finance is similar to a bank account overdraft; lending parameters are between £1,000 and £150,000, and the amount of lending is largely based on the applicant’s requirements and lender’s criteria. Applicants will only ever pay interest on money drawn from the account, offering flexibility to business owners and avoidance of unnecessary interest payments, knowing the cash is there when they need it without the worry of huge interest payments on top.
Flexible cashflow lending offers applicants a quick decision and is usually assessed within a couple of days, unlike other financing applications, which can take weeks or even months to arrange.
The lending provides business owners with a short-term financing option to allow a growing business to run smoothly and iron out unexpected costs or help with necessary costs to grow, offering many a buffer to manage the daily cashflow challenges businesses face. The lending is ideal for buying stock, paying VAT/tax bills, or helping pay for staffing, all of which are needed when taking a business to the next step.
Cash flow lending is available for companies and sole traders, regardless of whether the company is well established or a newly established start-ups (3 months trading required) and there are many solutions for all. Lending is capped at £150,000 and interest is only ever changed on monies drawn. The charges are always clear and transparent with funds often available almost immediately. The financing term is usually 12-24 months at which point the loan would need to be repaid.
Cash flow based lending allows individuals or companies to borrow money based on projected future cash flows of a company, allowing a business to grow. Credit ratings are important as are historical cash flows. Cash flow lending does not require the borrower to have physical assets in their business to use as collateral, the advantage being that obtaining financing is much quicker as collateral appraisal isn’t necessary.
Institutions underwrite cash flow loans by determining credit capacity; typically they will use a company’s earnings before interest, taxes and depreciation along with a credit multiplier to calculate this decision. Cash flow lending is generally a good option for companies that maintain high margins on their balance sheets or lack enough in assets to offer as collateral.
