Cash flow lending can provide a lifeline for businesses facing a cash crunch. It can also allow you to pounce on a growth or investment opportunity. However, it does come with risks, which is why it's important to understand what cash flow lending is all about.
How Cash Flow Lending Solves Business Challenges
Despite the high costs, cash flow lending can solve several critical challenges:
- Payroll stress, ensuring your employees get paid on time.
- Short-term operating expenses such as covering rent, utilities, and other daily expenses.
- Managing accounts payable and keeping good terms with your suppliers by paying on time.
- Seizing growth and investment opportunities that can drive future growth.
High-Interest Rates: Know the Full Story
With interest rates ranging from 20% to 50% (APR – Annual Percentage Rate - used by major banks), cash flow loans might seem daunting. Short term cash flow lenders tend to hide their high costs by disguising their interest rates as ‘simple interest”. Simple interest is based off the fixed initial borrowing amount and not the remaining reducing balance. Due to this a simple interest rate of 16% could likely mean an APR interest rate of 22-30%, depending on the loan term.
The Last Resort Before Voluntary Administration
When the cash flow dries up, even the most robust companies can find themselves in trouble. In times like these, cash flow lending can be a lifeline. But with high-interest rates (20-50% APR) and the risk of falling into voluntary administration looming, it’s essential to know the ins and outs before diving in.
Cash flow lending is often seen as the last option before considering the dreaded voluntary administration. While securing these loans can provide immediate relief, the high-interest rates (often advertised lower than the actual cost) make it a decision not to be taken lightly.
Having the right understanding of these risks is critical as well as the education around the cash flow product and what its true cost is to the business.
How Finance Brokers Can Help Secure Cash Flow Lending
We understand the complexities of cash flow management . Our experienced business finance brokers are here to help you navigate your options. Here’s why working with a broker is beneficial:
- We break down jargon and provide clear, trustworthy advice.
- Our brokerage services come at no cost to the business owner.
- We find solutions that fit your business’s unique needs.
- We help you understand the true cost of borrowing and find the best rates available.
Final Thoughts on Cash Flow Lending
Cash flow lending can be a vital tool for businesses facing financial hardships. However, its high costs and risks mean it should be considered carefully. At BlueRock, our mission is to support you every step of the way, ensuring you make informed decisions that protect and grow your business.
Remember, our business loan brokers are always here to assist you with straight answers and reliable advice. Reach out to us via the form below for any business finance queries and let us take the complexity out of finance solutions.
