Cash Flow is the Lifeblood of a Small Business and Critical in its Growth.

Along with debt management, strong cash flow provides the comfort and capabilities a business needs to invest in growth. Building new locations, investing in marketing and advertising, renovating your storefront, improving technology, providing more training and purchasing more inventory are among the ways your business can grow and improve with strong positive cash flow. Getting to a position of excess cash flow helps your company operate in a strategic, proactive way, rather than a reactive, defensive way.

Many businesses experience times when the need arises for extra capital to meet a short-term cash flow hiccup or to bridge a slow season. To avoid financial challenges such as returned checks or overdrafts, it’s a good idea to leave a meaningful cash flow cushion in your business banking accounts. Nevertheless, there are still situations where you might not have enough capital on hand to cover unexpected expenses, hence the need for a temporary cash flow loan.

The importance of strong cash flow is aptly stated in the common expression "cash is king." The premise of this is that having cash puts you in a more stable position with better buying power. While you can borrow money at times, cash affords you greater protection against loan defaults or foreclosures. Cash flow is distinct from cash position. Having cash on hand is critical, but cash flow indicates an ongoing ability to generate and use cash.

What’s more, it’s not always challenging situations that require a temporary cash flow loan, it could also be an opportunity to purchase inventory at a discount or launch a needed marketing campaign. A temporary cash flow loan might not make sense for every business owner, but can be beneficial to generally healthy businesses that need access to temporary cash and have the means to repay the loan quickly over a short-period of time. These shorter-term loans may include a higher rate—but the speed and convenience of accessing the cash quickly may be worth the extra cost.

The nature of the need usually dictates the type of loan and the terms. A business owner trying to meet a temporary cash flow need is really looking for a different type of financing than he or she would need to purchase a new warehouse or heavy piece of construction equipment. So long as revenues are expected to quickly bounce-back or increase, filling a short-term, or temporary, cash flow need will usually be best met by a short-term loan, these may include a line of credit or term loan of 12 months or less.

Cash flow also gives your business greater flexibility in responding to emerging dilemmas or making critical decisions. Confidence in cash flow makes it easier to make critical purchases in the near term rather than waiting. It also allows you to disperse cash in the form of dividends to shareholders or owners. This strengthens the bond between the company and its owners. You also have the ability to offer favorable credit terms to attract new buyers if you are less desperate for cash.

Uneven cash flow is one of the biggest challenges of small businesses throughout all industries. In a perfect world, you’d walk into your local bank and walk out with a business loan long before you wound up in a cash crunch. Well, those days are long gone! If you haven’t been in business at least two years, or lack good credit and collateral, chances are a traditional bank loan is never going to happen.

In order to deal with this shortfall, a cash flow loan may be your best option. For this type of business financing, lenders provide you funds and use your future expected cash flow as collateral for the loan. You’re essentially borrowing from cash that you expect to receive in the future by giving the lender the rights to a predetermined amount of these receivables. These are primarily used for working capital or take advantage of short-term ROI opportunities. Your credit scores will usually be checked, but they play less of a role. As the name indicates, the lender is more concerned with inspecting your cash flow (usually bank statements) to approve your application. Turnaround time is another great feature of a cash flow loan, as funding usually takes place in a matter of days.

Possible Financing Needs that are Suited to a Temporary Cash Flow Loan

There are numerous reasons a business owner might choose to borrow, but here are some situations where a short-term cash flow loan could make the most sense:

  • Overcoming a short-term seasonal cash flow bump: Many seasonal businesses require a little extra capital to meet expenses during a down time or before the busy season starts.
  • Unexpected expenses: It’s not uncommon for businesses to experience unexpected expenses like a major plumbing problem or other maintenance issue they might not have the cash flow to cover.
  • New project start-up costs: Ramping up for a new project or a new customer sometimes requires additional resources that might exceed a business’ ability to cover with cash flow, but will be recouped in 60 or 90 days.
  • An opportunity to purchase inventory at a steep discount: A temporary cash flow loan is a good way to take advantage of an opportunity to purchase inventory that has the potential to increase profits.
  • Emergency repairs to business-critical equipment: When equipment necessary to the operation of your business fails, it likely doesn’t make sense to wait several weeks to start repairs. A temporary cash flow loan can be a good way to access capital to start those repairs right away.

Although short-term, temporary cash flow financing is not appropriate for every business financing need, it may be a good fit for situations like those mentioned above. At these times, most business owners don’t have the luxury of weeks or months to find a business loan. Online lenders like LVRG are often able to provide fast approval (as quickly as a few minutes) and have money in your bank account as quickly as within 24 hours.

The importance of strong cash flow is aptly stated in the common expression "cash is king." The premise of this is that having cash puts you in a more stable position with better buying power. While you can borrow money at times, cash affords you greater protection against loan defaults or foreclosures. Cash flow is distinct from cash position. Having cash on hand is critical, but cash flow indicates an ongoing ability to generate and use cash.

Get a Quick and Simple Loan with LVRG

We understand the cash flow limitations that small business owners sometimes experience, including the unique challenges faced by seasonal business owners. We make temporary cash flow loans with the goal of helping small businesses grow. We offer lines of credit and cash flow loans that are based upon the overall health of your business rather than solely your personal credit score.