Cash flow refers to the flow of money generated by a business’s activity. With a good cash flow, businesses do not flourish and may even die. On the other hand, businesses with exceptional cash flows are robust enough to pay all their bills, take on a new product line and expand, all the while making a profit.

From time to time, businesses need to take out a loan, especially in seasonally low periods. Although there are many ways to obtain business financing, cash flow loans can be some of the best. They are non-collateralized loans that are used for operational expenses in small- and medium-sized businesses. These loans are used to finance operational expenses such as payroll and inventory and are paid back with incoming cash flows of the business.

Two Types of Cash Flow Loans

Merchant cash advances (MCA) and Automated Clearing House (ACH) loans are very similar to one another. Indeed, they could be considered siblings.

• ACH Loans. When applying for an ACH loan, the lender looks at the average daily balance of your business checking account. When the loan is signed, the business agrees to pay back the loan with periodic debits against the checking account. Unlike traditional small business bank loans, your working capital generally arrives very quickly and is ready to use as you need.   
• Merchant Cash Advances. Similarly, businesses sometimes utilize an MCA for operational funding needs. In this case, the lender is paid back not through the business checking account, but by the lending firm’s assessment of your future business credit card receipts. Again, your capital usually arrives rapidly for business use.  

These two types of cash flow loans should be considered with the spectrum of other loan types. Before obtaining one, be sure to have a simple explanation of all fees and charges before you sign, as well as the annual percentage rate that will be charged for use of the money. Contact Painted Horse Financial today if you are interested in learning more or starting the financing process.