What is a Cash Flow Loan?

Cash flow loans are unsecured types of loans that are used for daily operations. These loans are typically taken out by small businesses. Such loans are generally used in order to finance working capital. For example, small business owners use up the loan to provide payments for inventory, to pay rent, or to cover the payrolls. These loans are generally paid back using the incoming cash flow of the business itself. In case you need a cash flow loan Connecticut attorney, you should contact the experts at Martin LLP. They can help you in legal matters pertaining to such loans.

When it comes to cash flow loans, these are not even considered traditional loans offered by the bank. As you may already know, bank loans require a very thorough business credit analysis before they are handed out. When determining the general terms and conditions of a cash flow loan, the main lender will take into account the borrower’s ability to generate cash flow (the capacity of the business in terms of cash flow generation). A cash flow loan Connecticut attorney can assist you with all legal matters pertaining to such loans.

Smaller businesses, without a very extensive credit history, are the ones mainly benefiting from such types of loans. Also, businesses that do not have any assets to use as a backup for the loan or the ones that cannot make proof of a steady profitability factor will search to gain access to such loans. The backside of the matter is that because of this uncertainty, lenders will offer cash flow loans with much higher interest rates than usual. It is the risk factor that any lender considers first before handing out a loan. Quite often, the lender may require a personal guarantee on the part of the borrower in order to cover the gap of higher repayment risk.

Cash flow loans also come with higher origination fees when compared to traditional business loans backed by assets and other guarantees. Cash flow loans should be repaid as fast as possible because they put a huge strain on the general finances of the business itself.