Cash-Flow Financing

A type of loan that allows a company to borrow money on its expected future cash flows. In the business world, this type of loan takes the place of the kind of deal that on the street might get your arm broken if you didn't pay it back fast enough. Still, while you'll likely keep your arm, you might still lose the shirt off our back.

The problem often is the cost of these loans are very high, with giant interest rates and often additional fees involved as well. Cash flow financing is different from traditional business borrowing whereby company’s assets secure the loan. Rather than having set payments, this type of borrowing has payments that are typically based on a percentage of receivable payments. For some more risky loan programs, the settlement or payment is structured as a percentage of daily credit card settlements and can even be required on a daily basis.

Because of the varying nature of required payments, this type of financing is often only used on a temporary basis and only when it is the only option available and before you put the proverbial, “business is temporarily closed for remodeling” sign up on your storefront while you contemplate moving back in with your parents...