Looking at your cash flow is like a ‘temperature check’ on the health of your business. 

Money in vs money out is a good indicator of your business’s short-term performance. Without access to the working capital that comes with cash flow, you’ll struggle to invest in your business’s growth.

But before you move forward with this business funding option, you’ll need to do your research…

What is a cash flow loan?

Lenders decide whether to issue cash flow loans based on your historical and future cash flows. By looking at your business’s cash flow, a lender can determine how much you’re likely to be able to pay off - and when.

These loans —like any other— build working capital, helping you cover the operational costs involved in growing your business. So whether you want to fund ad campaigns, inventory, or a few new hires, a cash flow loan will give you the wiggle room you need.

Lots of business owners take out cash flow loans because they provide large amounts of funding to a business without requiring collateral or strong credit to qualify.‍

That doesn’t mean lenders won’t look into your credit history, but it’s not usually the deciding factor. Instead lenders will focus on your ability to generate cash flow and if you do have poor credit, you may be able to make up for it with strong revenue.

Cash flow lending is one of the fastest ways to receive business funding, but it’s also the most expensive. 

Their flexible requirements present a greater risk for lenders, so to offset the risk they charge higher interest rates. Some lenders will even require a personal guarantee, meaning you’ll have to use your business or personal assets as collateral against your loan. 

Despite this risk, cash flow loans can be a helpful option for businesses in need of short-term funding to cover operational expenses or take on a new project.

How does cash flow lending work? 

There are multiple types of cash flow loans, along with many different lenders, so the specifics can vary!

For most business cash flow loans, you borrow capital and agree to repay the lender with a portion of your future revenue. The average APR for a cash flow loan can range from 10% to 90% depending on the provider, the loan, and the repayment schedule you choose. 

Loan term lengths can range from 3-36 months.

To repay these loans, lenders take daily or weekly automatic payments directly from your revenue. If your revenue suddenly drops, you may struggle to make payments and be burdened by extra fees.

Since these loans are a short-term funding solution with high borrowing costs, they work best for growth opportunities rather than as a way to fund the day-to-day.  

You can use a cash flow loan to: 

  • Buy inventory in bulk
  • Upgrade your equipment
  • Cover gaps in cash flow during slow sales months
  • Pay outstanding invoices
  • Fund advertising campaigns
  • Rent larger office space
  • Make an important hire

You won’t find a cash flow loan offered in a traditional bank but they are available through online lenders. Let’s take a look at the types of businesses these online lenders are looking to invest in.

How to qualify for a cash flow loan

Cash flow loans are typically easier to qualify for than traditional bank loans, but lenders will want to know that you can reliably pay it back.

To see if you qualify, lenders are likely to look at your debt to income ratio, projected revenue growth and current operating cash flow. 

Using your debt to income ratio to qualify

Lenders will use your debt to income ratio, or DTI, to see what you’ve borrowed and what you’re still paying off.

This ratio helps determine your ability to take on additional debt - and if so how - much. The lower your DTI, the more likely you are to qualify for the loan of your choice. 

Using your projected revenue growth to qualify

Lenders use your projected revenue growth and past business performance to decide how much capital you qualify for. This process is more complicated for seasonal businesses and you might have to give some additional insight into your finances. 

Lenders will also want to know what you intend to use the funds for. They’re more likely to lend to you if you can demonstrate that the funds will quickly help you build more revenue.

Using your operating cash flow to qualify

Finally, operating cash flow (your net cash from daily business operations) is a formula used to calculate how much capital you generate day-to-day. 

It’s as simple as showing that you’re taking in enough money to be able to pay for your business’s regular expenses. Strong operating cash flow can give you access to more loan options, so you could end up giving up less capital.

Demonstrating operating cashflow can be a helpful option for startups without collateral, an extensive business history or strong credit profile.

Like many other types of financing, business cash flow loans are designed to help businesses secure the working capital needed to grow. 

The specifics of each loan option varies, and you should evaluate your personal and business finances to help determine the best option for you. 

If you're in need of fast, short-term funding, and don't qualify for traditional loan options, a cash flow loan could be a good option for you.

The differences between cash flow loans and asset based loans


Collateral is the main difference between cash flow loans and asset based loans. 

Cash flow loans are usually unsecured and don’t require most types of collateral. However, if you’re a small business owner you may be asked to offer a personal guarantee and demonstrate that you’ve got a strong credit score.

Asset based lending, on the other hand, is secured by some sort of collateral, such as real estate, equipment or inventory. As a result, rates for asset-based loans tend to be lower.

Both secured and unsecured loans have their benefits and risks, but it’s up to you to decide which option works best with your funding goals, personal credit history, and available assets.    

Processing time

It can take up to a month for asset-based lenders to even review your application. Sometimes the lender will visit your business in-person to examine the assets you plan to offer as collateral.

That’s a stark contrast to cash flow loans which can be approved in as little as 24 hours, depending on the specific loan and lender you choose. 


For asset-based loans, you're most likely to make monthly or weekly repayments. For a cash flow loan, you'll make automatic daily or weekly repayments taken directly from your bank account or credit/debit card sales.

The different types of cash flow finance

A cash flow loan is an umbrella term for the various cash flow finance solutions that allow you to use your past and future sales revenue to help secure capital. These funding solutions each have slightly different qualification requirements, repayment structures, and borrowing costs. 

Let’s take a look at the different types of loan involved.

A business line of credit

What is a business line of credit?

A business line of credit works similarly to a credit card. 

You can receive funds and make repayments as long as you’re within your credit limit, and you only pay interest on the capital you use. The APR for a line of credit can range anywhere from 3% to 80% and lenders may let you borrow up to £500,000 depending on your qualifications.

A business line of credit is a great short-term funding option. Businesses will often use it as and when they need to cover operational expenses, emergency expenses or to support an ongoing project. 


With a business line of credit, you can borrow a larger amount of capital (with lower rates!) compared to traditional business credit cards and other short-term financing options.

It’s a funding option you can turn to again and again, provided you keep up with payments and prove that you’re a reliable borrower.


Lenders usually have minimum draw requirements, high credit score requirements, and some even require a personal guarantee. 

Merchant cash advance

What is a merchant cash advance?

A merchant cash advance, or MCA, is an alternative cash flow finance option to the traditional small business loan

A lender gives your business a sum of money, and you repay it as a percentage of your future revenue. MCAs give you quick access to capital, but they can be risky and expensive. 

It’s important to note that a merchant cash advance is not considered a loan. Instead, MCAs are commercial transactions where a provider purchases a percentage of your future sales.

Cash advances operate differently to more traditional financing options like loans, and it's up to you to determine if they’re the best choice for your business and financial goals. 

If you want to learn more, our article on merchant cash advances is a good place to start.


Merchant cash advances have a simple application process, and you can receive your funding in as little as 24 hours. You don’t need a lot of paperwork to get started, you just need to show that you’ll be able to pay the advance back.

MCAs are also unsecured, meaning you don’t have to put your business assets at risk in order to qualify. This makes MCAs a popular option for business owners who haven’t got the best personal or business credit profiles.‍

Another key advantage is that when sales decline or stop, so do repayments. However, merchant cash advances also come with a long stop date, meaning the advance needs to be paid in full by a certain date.‍


Unfortunately, the APR for a merchant cash advance can range anywhere from 20% to 100%. This is much more expensive than the typical small business loan, which tends to have an APR of 10% or lower

Why is APR so high for merchant cash advances? It’s because these loans are designed to be paid back within months, not years.

Merchant cash advances don’t help you build credit, but if too many lenders pull your score it could have a lasting impact on your credit profile.

Business term loan

What is a business term loan?

With business term loans, you borrow capital from a lender, and agree to pay it back with fixed repayments. These loans have low interest rates but come with strict credit or business performance requirements. Lenders are  also unlikely to lend to immature start-ups.

You can get term loans from banks and credit unions, while online lenders charge the highest interest rates. This is because they tend to disburse funds quicker and do less due diligence before making an offer. 


Term loans generally offer low rates and a predictable repayment schedule. The average APR for a term loan ranges from 7% to over 30%, depending on your loan provider. 

Most lenders don’t have strict requirements on how to use your capital and allow you to borrow a large amount at once.   


When you apply for a term loan, it can take a while for the lender to review your application and send the funds you need. Additionally, these loans have a long-term repayment schedule compared to other cash flow lending options, so interest can accumulate quickly.

To qualify for a term loan, you usually need a strong credit score, a couple of years’ trading history and you may be asked to offer a personal guarantee.

Short-term loans

What is a short-term loan?

Short-term loans work like business term loans, but have a much shorter repayment period. With this type of cash flow financing, you make daily or weekly repayments over a repayment period of between 6-18 months.. 

This is a financing option for businesses who need capital fast and don’t want a long term repayment structure. 


These loans are much easier to qualify for than business term loans. Lenders have more flexible qualifications which result in a quicker application process overall. 

Since these loans are meant to be short-term, you receive funding fast and make repayments sometimes over just a few months.   


Short-term loans allow you to borrow smaller amounts of capital than business term loans. 

Since this cash flow lending option has flexible requirements, lenders charge higher interest to offset the risk they’re taking on.

Finally, is a cash flow loan right for your business?

It can be stressful committing to a loan so we know how important it is for you to choose the right type of loan.

To know if a cash flow loan is right for your business you should consider:

  • How much money you will need
  • What you are using the money for
  • If you’re existing cash flow is healthy
  • How quickly you need the financing
  • What interest you can afford on top of the loan
  • How quickly you would like to repay it

Once you’ve answered those questions you can have more confidence when applying for the loan or you might decide to move forward with a different financing option altogether. Either way, you’ll be one step closer to funding your business. 

At Uncapped, we offer equity-free, interest-free capital with offers ranging from £100k to £10m. See if you qualify!