What is Cash-flow Based Financing?

Many businesses have already proven “concept” and have consistently increased sales. Their strength is that they have shown stability and that they can effectively run a growing business. The risk to the lender is less as they are established businesses that are growing. How are your sales? Sales are the difference between an untested concept or idea, and a real operating business. Will your idea be well received? Do YOU know how to operate a business? Sales answer these questions. If you have consistent sales, the next question is does the business have existing cash flow proven by bank statements? There are lending options available that only require a quick bank statement review for approval. They won’t even need to look at your tax returns, so even if your business shows a loss you’ll still be okay. The next question is does the business have over $60,000 annually received in credit card sales? Does the business have over $120,000 annually going through their bank account? If the answer is yes then revenue financing or merchant advances might be the perfect funding product.

For this type of “cash flow” based financing you must be in business six months.No startup businesses can qualify. You should have at least 10 monthly deposits or more going through your bank account, not just a few larger deposits. Most advertising you see for “bad credit business financing” are these products.These are short term “advances” of 6-18 months. Mostly short term at first, such as 3-6 month terms. Then when half is paid down lender will lend more money at a longer-term, such as 12- 18 months. Loan amounts typically go up to $500,000. Your actual loan amount is based on your revenue, usually, you can get lent 8-12% of annual revenue, based on your verifiable revenue per your bank statements. For example, a company that has $300,000 in sales might get a $30,000 advance initially. With revenue and merchant financing, 500 credit scores accepted and are COMMON with this type of lending. Bad credit is okay as long as you aren't actively in trouble such as in bankruptcy or have serious recent and unresolved tax liens or judgments. For this type of cash flow based financing rates of 10-45% are common depending on risk. Risk factors include Industry, Time in business, Bank statement details- number of deposits, average daily balance, NSF charges, amount of deposits monthly, and credit quality. Usually, rates are higher on the first advance until you “prove” yourself to the lender. No tax returns are required, no other income docs are required, and no collateral is required.