Key points
- Cash flow lenders lend against your trading history instead of property.
- Limits are tied mostly to turnover, often around one to two months of it.
- Compare total repayable and early repayment terms, not just the headline rate.
Cash flow lending is business finance assessed on the money flowing through your business instead of on property or equipment. It has grown quickly as non-bank and online lenders have learnt to read bank statements in minutes, and it now fills a gap many small businesses used to fall into: too small or too new for a bank, but trading well enough to borrow.
How lenders assess you
Instead of valuing a property, a cash flow lender looks at your recent business bank statements, usually through a secure read-only connection. It looks at average monthly deposits, how steady they are, existing loan repayments, dishonoured payments and the balance the account typically holds. It then sets a limit and repayment it thinks the business can carry comfortably.
Most cash flow lending is unsecured, meaning no specific asset is pledged. Lenders usually take a personal guarantee from directors and may register a general security interest over business assets.
The main products
- Unsecured business loans: a lump sum repaid over a few months to a few years.
- Lines of credit: a limit you draw on and repay as needed, paying interest only on what you use.
- Invoice finance: advances against unpaid customer invoices.
- Trade finance: payment of suppliers, repaid when the goods sell.
How much can you borrow?
Limits track turnover. For an established business, many lenders consider around one to two months of average turnover, adjusted for margins, existing debts and credit history. A business depositing $60,000 a month might see unsecured offers from roughly $40,000 to $100,000. Newer businesses usually start lower.
Example only. Each lender applies its own policy.
What it costs
Cash flow lending costs more than a secured bank loan because the lender carries more risk. Pricing comes in two main forms: an annual interest rate, or a fixed cost per dollar borrowed. They aren't directly comparable. The cleanest comparison is the total amount you'll repay, the term, and what happens if you repay early. Some lenders charge the full interest regardless; others discount it.
Is it legit?
Established cash flow lenders are mainstream finance businesses, and several sit on major broker panels. The risks come from the product being used for the wrong job. Watch for:
- Taking several short-term loans at once, sometimes called stacking, which can overwhelm cash flow.
- Using short-term money for long-term needs such as premises or large equipment.
- Borrowing to cover ongoing losses instead of a timing gap.
When it makes sense
Cash flow lending works best for a short-term need with a clear payback: materials for a contract, stock for a season, wages ahead of a big invoice, or a one-off tax bill. If you own property and need a larger amount or a longer term, a property-backed loan may cost less. Our cash flow finance page compares the options.
General information only. It doesn't take your circumstances into account and isn't tax, legal or financial advice. Speak to your accountant or a lawyer about your situation.