Compare business loans between £1,000 – £5,000,000

We help small businesses and sole traders find the right funding – fast.

Tell us a bit about your business and how much you need.
Instantly see loan options you’re eligible for.
Go straight to the lender – no repeating forms or details.

Apply today and get matched with trusted lenders ready to support your growth.

Female cafe owner opening a business savings account

Business Cash Flow Loans

A business cash flow loan can provide funding to support the everyday running of your business and cover short-term financial challenges.

Cash flow is what makes your business tick. But what if the flow of cash through your business isn’t as strong or regular as you need? Whether this is due to a seasonal dip in sales, or an unexpected rise in costs, a cash flow loan could provide the short-term funds your business needs to operate day-to-day.

What is a cash flow business loan?

A cash flow loan (or cash flow finance) is a type of unsecured business loan designed to help businesses overcome short-term financial challenges and cash shortfalls. Because of how they are used, cash flow loans don’t usually require any assets or collateral, and are often quick and easy to get.

Cash flow lending also tends to be for smaller amounts and involve shorter repayment periods. This reflects the idea that these loans aim to provide a cash injection to your business as opposed to a long-term funding solution.

How do cash flow loans for business work?

In many ways, a cash flow loan works like any other business loan. You borrow the amount you need to cover your costs, and then you repay that sum, with interest.

However, they can differ from traditional, long-term business loans in a number of important ways:

Cash flow loans are typically based on future revenue: Instead of basing your eligibility on the assets you own, cash flow loans are unsecured. Lenders will be interested in your past and future cash flow, and base the amount you can borrow on your estimated future revenue.
Business performance matters more than your business credit score: While your business credit score will be taken into account, lenders will be more interested in your past and estimated future performance when considering you for a loan.
Cash flow loans are quick to arrange: If eligible, your application could be approved much faster with a cash flow loan than with a standard business loan.
They are designed for short-term use only: You will usually be expected to pay back your cash flow loan in months, rather than years. Although the repayment schedule will vary from lender to lender and loan to loan, it is usually between one and 12 months.
They come with higher interest rates and fees: Due to being both unsecured and short-term, cash flow loans will normally have higher interest rates and fees than a traditional business loan.
You may need to provide a personal guarantee: If your business defaults on the loan, and the lender has asked you to give a personal guarantee, you will become personally liable for paying the remaining sum.

What can a business cash flow loan be used for?

There are a range of reasons why you may consider a cash flow loan for your business. These include:

paying day-to-day business costs, such as rent, bills and wages
covering seasonal dips in trading
hiring extra staff – for example, to deal with seasonal demand
purchasing stock
buying or hiring essential business equipment

Is my business eligible for a cash flow loan?

As with most types of business loan, you’ll need to be at least 18 years old and have a business which is based in the UK to qualify for a business cash flow loan.

Beyond that, cash flow loans can be an option for small businesses, sole traders, limited companies and startup businesses.

Eligibility is usually based around the performance and cash flow of your business, both in the past and what is projected for the future.

For this reason, factors such as how long you’ve been trading and turnover are usually important, though minimum requirements tend to differ from lender to lender. Credit score may also be considered, but is often less important for cash flow loans.

» MORE: How to get a business loan

How can I apply for a cash flow loan?

When looking to apply for a cash flow loan, you will likely need to provide the following information:

your business details, such as registered address and name
the number of years you have been trading
your average monthly turnover or card sales
the amount of money you are looking to borrow

This will help the lender assess your eligibility, and whether or not you are suitable for a cash flow loan.

» COMPARE: Find business loans to suit you today

What are the pros and cons of a cash flow loan?

Advantages of business cash flow loans

For businesses facing short-term financial challenges, but lacking a substantial credit history or the assets required for a secured loan, cash flow loans have certain benefits.

They can help manage and smooth fluctuations in cash flow.
They are quick to obtain.
You won’t need to put up any assets or collateral.
Funds can be used for a wide range of purposes.
Short repayment periods means you’re not taking on debt that should take years to repay.
Businesses without a strong credit history can access them.
They can help improve your credit score if they are paid off in a short period of time.

Disadvantages of business cash flow loans

As with all forms of lending, it is vital that you pay attention to the potential drawbacks of cash flow loans before applying.

They are only suitable as a short-term solution to aid cash flow, and not as a long-term fix.
Interest rates and fees are typically higher than with other business loans.
You may need to give a personal guarantee, making you personally liable for repayments if your business can’t repay the loan.
Some loans may require automatic payments of a set amount, which could be problematic if your business’s cash flow is unreliable.

Other types of cash flow lending

Alongside unsecured cash flow business loans, there are some other finance options that can often help manage cash flow.

Merchant cash advance

If your business frequently receives debit and credit card payments from your customers, then you could look into a merchant cash advance.

You would receive a lump sum payment from the lender. The amount borrowed will then be repaid through a pre-agreed percentage of your future debit and credit card transactions until it is cleared.

Revolving credit facility

With a revolving credit facility you have the flexibility to withdraw and repay funds as and when you want for the length of your agreement.

Say you had a maximum limit of £10,000. You borrow £2,000 from that amount, to be repaid over three months. You will only pay interest on the £2,000 you have taken out. Once that sum is completely cleared, you will again have access to the full £10,000, as long as you are still within the agreed borrowing period.

Invoice finance

If your business involves regularly invoicing clients, then you may want to consider invoice financing. This is where you borrow money against your unpaid invoices.

There are two main types of invoice financing: invoice factoring gives your lender control over chasing your clients for payments, while invoice discounting leaves that job up to you.

Image source: Getty Images

Dive even deeper