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Almost every business needs a loan at one time or other, and the type of loan a business owner applies for will depend upon a number of different factors. One type of loan that a business may try and obtain is what is known as cash flow revenue based loan. These types of loans are best suited to companies that show high margins on their balance sheets.

What is A Cash Flow Revenue Base Loan

A cash flow revenue based loan is a loan that is given based on a business’s projected cash flow. The lender providing the loan determines the borrows suitability for the loan based on looking at the business’s past cash flows and predictions of future cash flows, the company’s credit rating, and enterprise value. This means if your revenue stream is very high the sky is the limit when it comes to business funding, even if your personal credit score is very low

The company is borrowing money based on the revenue they plan on making in the future. This type of loan may be worth considering for businesses that are growing and taking in more and more money.

Benefits Of Cash Flow Revenue Based Loans

Businesses find several benefits in this type of loan for their businesses and some of these benefits include:

  • Faster Funding- Because there is little or no collateral required to get this type of loan, the funding for this loan often comes through faster due to the fact there is less paper work required.
  • Larger Amount of Money May Be Loaned- A cash flow revenue based loan may result in the business being able to secure a larger amount of money than they would qualify for with more traditional banks loans. More loan money means that you may be able to due more with the loan.
  • Little or No Collateral May Be Required- In most cases, cash flow revenue based loans don’t require collateral to secure the loan.
  • During Slow Business Times Your Payback is Less- One of the real benefits of this loan is that during those slow times when your business is not taking in as much money your payback is less, so your business can keep on running smoothly while you are making those loan payments.
  • Don’t have to Give Up Equity- With a cash flow revenue based loan you don’t lose any equity in your business like you would if you were to take on an investor. That means you or you and your partners still own 100% of your business.

Things to Consider When Taking On A Cash Flow Revenue Based Loan

There are a couple of things you need to consider before trying to secure a cash flow revenue based loan.

  • Businesses who make very little revenue may not qualify for this type of loan especially if they don’t have good credit.
  • Once you have taken out the loan you may find it takes longer to pay which can result in a higher cost for your business.

Once you consider all of the benefits and problems of a cash flow revenue based loan you can decide if this type of loan is right for your type of business.


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