Understanding cash flow lending
Cash flow has the potential to keep small business owners awake at night. But for Australian small businesses going through a tough spot or seasonal downturn, there’s plenty of help at hand. Cash flow lending could be the smart answer to your clients’ small business needs – and boost your portfolio at the same time.
What is cash flow lending?
Cash flow lending usually comes in the form of a short-term loan that small business owners might use for any business purpose. This can mean covering a temporary shortfall for paying wages, investing in new equipment or taking up a business opportunity that’s too good to miss.
You might already be having cash flow conversations with your clients, or talking about asset finance. The next step is partnering with a cash flow lender with the expertise that let’s you add value for your small business clients.
How is cash flow lending different to traditional business loans?
Traditional business loans typically rely on securing the loan with an asset. So if a business owner puts up a vehicle or their family home as security, that asset can be at risk. Cash flow lending takes a better approach – the health of the business is used to assess loan applications, and often loans of lower amounts, say under $100,000, don’t need to be secured by an asset up front.
21 per cent of businesses list financing as one of their top challenges. On top of this, 40 per cent report short-term cash flow as the most common reason for seeking finance, so when a small business needs a cash flow boost, they usually need it fast. This means that timing is often critical, with small business owners citing “slow processes” as one of the biggest pain points when seeking funding.
That’s why the cash flow lending process is so much smoother:
- Faster – apply in minutes and get a decision the same or next day.
- Simpler – often less documentation and paperwork than a traditional loan.
- Structured to suit business – repayments work with cash flow (usually daily or weekly).
- Clear – the total amount to be repaid is outlined up front and there are no penalties if you pay out early.
Prospa tip: Look for cash flow lenders using a factor rate so you can avoid fluctuating interest rates.
What are the benefits of cash flow lending for you and your clients?
Diversifying into cash flow lending boosts your own business as well as your clients. That’s a win-win.
Brokers partnering with a smart cash flow lender can:
- Diversify their client portfolio to create a new long-term revenue stream.
- Access lender expertise in a niche small business market.
- Add value for existing and new clients.
- Help build and grow Australian small businesses.
- Provide peace of mind for small business clients whose number-one goal is steady cash flow.
Prospa tip: Partner with a lender you can trust who is committed to supporting Australian small businesses. Choosing a credible, niche cash flow lender is likely to be a better and more convenient choice for you and your clients in the long run.
Build cash flow confidence
Plenty of businesses will be looking for a cash injection at some point to manage a challenge or grab hold of an opportunity. Guiding them to a smart, credible solution could make an incredible amount of difference to their business. And it will help everyone get a better night’s sleep too.
If you’ve got some of your personal finances mixed in with your business finances, here’s four reasons why you might consider starting the separation process.View more
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