What cash flow finance is
Cash flow finance is lending based on the money moving through your business instead of on property or equipment. Lenders read your bank statements, turnover and trading history, then set a limit they think the business can repay from its regular income. Most facilities are unsecured, although lenders usually ask directors for a personal guarantee.
It works best for a short-term gap with a clear way out: wages due before a large invoice is paid, stock ahead of a busy season, materials for a new contract, or a tax bill that has landed at an awkward time.
The main types of cash flow lending
| Product | How it works | Typical term | Best for |
|---|---|---|---|
| Unsecured business loan | A lump sum repaid in fixed instalments, often weekly or fortnightly | 3 months to 3 years | One-off costs with a clear payback |
| Business line of credit | An approved limit you draw on and repay as needed. Interest is charged on the amount you use. | Ongoing, reviewed yearly | Uneven or seasonal cash flow |
| Invoice (debtor) finance | The lender advances most of the value of unpaid invoices and is repaid when your customers pay | Ongoing | Businesses waiting 30 to 90 days to be paid |
| Trade and stock finance | The lender pays your suppliers, and you repay once the goods sell | 60 to 180 days per drawdown | Importers, wholesalers and retailers buying in bulk |
Terms vary by lender. Your broker will tell you which structures suit your trading pattern.
What lenders look at
- Trading history. Some lenders start at six months of trading. Larger limits usually need one to two years.
- Turnover pattern. Steady or growing deposits help. Dishonoured payments and large unexplained swings count against you.
- Existing debts. Lenders check the repayments already coming out of the account, including other short-term loans.
- Your ATO position. Lodgements should be up to date. A tax debt on a payment plan isn't always a deal-breaker.
- Credit history. Both the business and its directors. Past defaults narrow the field but don't always rule you out.
How much you can borrow
Unsecured limits are tied mostly to turnover. For an established business, many lenders will consider somewhere around one to two months of average turnover, and less for a newer business. Margins, existing debt and credit history all move the number.
As an example, a business depositing about $80,000 a month might see unsecured offers ranging from roughly $50,000 to $150,000. If you need more than turnover supports, a loan secured against property usually costs less and allows a longer term. See property-backed loans.
What it costs
Unsecured lending costs more than a bank loan secured by property, because the lender has less to fall back on. Some lenders quote an annual interest rate. Others quote a fixed cost per dollar borrowed, sometimes called a factor rate. The two aren't directly comparable, so compare the total amount you'll repay and the effective annual cost.
- Establishment fees are often deducted from the amount advanced.
- Early repayment terms vary. Some lenders charge most or all of the interest even if you repay early, while others discount it.
- Repayment frequency matters. Daily or weekly direct debits suit some businesses and strain others.
Your broker will set out the rate, fees and total cost for each option before you choose.
When cash flow finance isn't the right fit
- When the business is losing money month after month. A loan adds cost to a problem it can't fix.
- When you already have two or three short-term loans. Consolidating them into one longer facility, sometimes secured by property, is often cheaper.
- When the need is long term, such as buying premises or a large machine. Commercial property or equipment finance will usually cost less.
- When the money is for the ATO. Compare the cost against a payment plan first; our ATO debt funding page shows how.
How the process works
- Answer the quiz. It takes about a minute and doesn't touch your credit file.
- A broker calls you to understand the need, the timing and how you plan to repay.
- You share recent business bank statements, usually through a secure read-only link, plus ID.
- Your broker shortlists suitable lenders and explains the cost of each before anything is lodged.
- The lender assesses the application. Straightforward unsecured deals are often approved within one or two business days, and some lenders fund within 24 hours of approval.
Example scenario
A joinery business turning over about $120,000 a month wins a $400,000 fit-out contract and needs $60,000 of materials up front. The client pays in stages over 90 days. A short unsecured loan or a line of credit covers the materials, and the business repays from the progress payments. Because the income is tied to a contract, the broker looks for lenders comfortable with project-based revenue.
Example only. It isn't a real client, and lender decisions depend on the full application.