The Basics of Cash Flow Loans
Maintaining excellent cash flow is important for every business. This is a sign of your business’s health. With strong cash flow, you can reinvest in company growth, taking care of needs such as hiring additional employees, purchasing more inventory, or paying for marketing. One of the best ways to compensate for factors outside of your control is to use a cash flow loan when needed. How does this type of financing work?
What Is a Cash Flow Loan?
Cash flow loans, or ACH loans, are a type of advance based on your company’s financial possibilities. The lender extends you a certain amount of working capital depending on what you should be able to repay easily. This means that ACH loans aren’t a large as traditional loans for real estate or equipment purchases. However, they’re perfect for day-to-day needs such as payroll, tax payments, rental costs, inventory purchases, office equipment needs, and business emergencies.
What Is the Difference Between Cash Flow Loans, Factoring and Merchant Advances?
These types of alternative financing are closely related but somewhat different from each other. In invoice factoring, your business uses unpaid invoices to obtain an infusion of cash immediately instead of having to wait 30 or 60 days for payment. Each invoice is treated separately as a one-time transaction.
With a merchant cash advance or MCA loan, you receive financing based on a percentage of your monthly credit card sales. Every month, a percentage of these sales goes to the lender until you manage to pay off the loan completely. Since this option is percentage-based, it doesn’t matter if your sales drop unexpectedly.
ACH loans work in a similar way, but they’re based on the amount kept normally in your business’s checking account. At regular intervals, the lender withdraws funds directly from your checking account until you pay off the business loan.
What Are the Options for Cash Flow Loans?
There is often a lot of flexibility for setting up ACH loans tailored to your company. You can agree upon the interval required for repayment, whether weekly, monthly, or quarterly. This gives small businesses and seasonal businesses a chance to get excellent financing.
What Are the Advantages of ACH Business Loans?
This type of business loan is easier to qualify for than traditional loans. That makes it attractive for companies with fair or poor credit. As long as your checking account has solid activity, you can apply for and get approved for a cash flow loan. By partnering with a trustworthy lender, this flexible option can be an amazing way to take care of your company’s cash flow.