Keep your business on track with a cash flow loan

A business cash flow loan is a type of financing that allows businesses to borrow money based on their projected future cash flows. This loan helps businesses cover short-term expenses, manage working capital, and support operations without needing to provide physical assets as collateral.

One of the main benefits of cash flow loans for small businesses is that they’re fast and flexible. Because they’re usually smaller and taken over a shorter period of time, they’re usually easier and quicker to access (subject to approval).

According to the Xero 2023 Money Matters report, 72%  of SMEs have experienced at least some cash flow issues in the past 12 months.

This can be attributed to factors such as economic uncertainty, seasonality, fluctuations in sales, or unexpected costs. Whatever the reason, it’s important to stay financially secure and manage any short-term cash needs.

What can you use a cash flow loan for?

Cash flow loans can be pretty versatile and can help you manage your day-to-day operations or even fund growth opportunities. Here are some common uses for cash flow loans:

• Managing cash flow fluctuations: if your business has seasonal ups and downs, or you experience unexpected changes in revenue, a cash flow loan can help you cover expenses during those lean periods.

• Covering payroll: sometimes, you might find yourself short on cash when it's time to pay your employees. A cash flow loan can help you cover payroll expenses and keep your team happy and motivated.

• Purchasing inventory: if you need to stock up on inventory, especially for seasonal sales or to fulfill a large order, a cash flow loan can provide the funds you need to buy the products or materials without straining your budget.

• Expanding or improving your business: a cash flow loan can give you the financial flexibility to invest in growth opportunities like opening a new location, launching a new product line, or upgrading your equipment.

• Marketing and advertising: to attract new customers and boost your sales, you might need to invest in marketing and advertising campaigns. A cash flow loan can help you fund these initiatives without cutting into your operating budget.

• Emergency expenses: sometimes, unexpected expenses pop up, like a broken piece of equipment or a sudden need for extra staff. A cash flow loan can help you cover these costs without derailing your budget.

Benefits of cash flow loans for small businesses

Cash flow loans give small businesses fast access to funds without needing to secure the loan against physical assets. They’re also typically easier to qualify for than traditional loans and are built to flex around your revenue cycle.

Key benefits include:

• Quick funding: Cash flow loans are often processed faster than traditional business loans. If your application is approved, funds could land within days—ideal when you need to cover payroll, supplier payments or unexpected costs.
• No collateral required: Because these loans are usually unsecured, you won’t need to put up assets like property or equipment. This makes them a good fit for businesses without large balance sheets or fixed assets.
• Flexible usage: Use the funds for working capital, buying stock, managing seasonal dips or investing in short-term growth. You’re not tied to a specific purpose in the way you might be with asset or equipment finance.
• Revenue-based eligibility: Cash flow lenders often focus more on your sales performance and projected income than your credit score or trading history. This can open up borrowing options for growing businesses that don’t yet have long track records.

Limitations of cash flow loans

By nature, cash flow loans are designed for short-term needs, not large-scale or long-term investments. If you’re looking to fund an expansion or buy expensive equipment, they may not be the best fit.

Here are the main limitations to consider:

• Short repayment periods: These loans are typically repaid over a few months to a year. That can mean higher monthly repayments compared to a long term business loan or asset finance deal.
• Higher interest rates
  Since they’re unsecured and carry more risk for the lender, cash flow loans often come with higher interest rates than traditional loans or secured loans. The cost can add up if repayments aren’t made quickly.
• Potential for debt cycles: Used well, cash flow loans smooth out income gaps. But if they’re used repeatedly to cover basic running costs, it can lead to over-reliance on borrowing and put more pressure on your finances.
• Not suited for long-term funding: If you need money for a large capital project like buying a new premises or expanding your team then a cash flow loan might fall short. A term loan or asset finance agreement could offer better value and structure.

How do cash flow loans compare other business finance options?

Cash flow loans offer quick, unsecured funding based on your business’s projected income. But they’re just one option among many. Depending on what you need funding for, other types of finance might offer more flexibility, better rates, or a longer repayment window.

Trade credit

Trade credit is when your supplier lets you buy now and pay later, typically 30 to 90 days after delivery. It’s informal finance built into your supplier relationships.

Unlike a cash flow loan, trade credit doesn’t involve interest or fees if managed well. But it’s limited to the supplier’s terms and often capped. A cash flow loan gives you direct access to funds, which you can use across your business—not just for supplier invoices.

Supply chain finance

Supply chain finance is a buyer-led funding allows suppliers to get paid early by a third-party finance provider. The buyer then settles the invoice later.

Supply chain finance is usually cheaper for the supplier, because the rate is based on the buyer’s credit strength. But it requires buyer setup and approval. With a cash flow loan, the business controls the borrowing directly and can access funds faster, without relying on another party’s systems or credit profile.

Asset finance

Asset finance lets you spread the cost of equipment, vehicles, or machinery over time—either by leasing or borrowing against the asset’s value.

Asset finance is ideal for big purchases but is tied to specific items. A cash flow loan offers more flexible use of funds and doesn’t require assets as security. However, asset finance often comes with lower interest rates and longer terms.

Invoice finance

Invoice finance unlocks cash tied up in unpaid customer invoices. You get a percentage of the invoice upfront, then the rest (minus fees) when the customer pays.

Both options improve cash flow, but invoice finance is only available if you issue invoices. Cash flow loans work independently of your billing cycle and can be useful if you need broader access to working capital or don’t want to give up control of your receivables.

Revolving credit facilities

A revolving credit facility offers ongoing access to capital, making it ideal for covering short-term gaps. A cash flow loan is typically a one-time lump sum with fixed repayments. If your cash flow needs are regular or seasonal, revolving credit may be more cost-effective over time.

Merchant cash advances

‍Like cash flow loans, merchant cash advances are unsecured and based on projected revenue. But repayments are tied to turnover, which helps during quiet periods. They can be more expensive overall and aren’t ideal unless your business takes regular card payments.

Can I get a cash flow loan with iwoca and what are the eligibility criteria?

iwoca offers flexible cash flow loans designed to help small businesses access funding quickly, without the complexity of traditional lenders. Whether you need to cover a short-term gap or seize a growth opportunity, an iwoca Flexi-Loan gives you the control to borrow what you need, when you need it.

Eligibility criteria are straightforward and we aim to make funding accessible to as many UK businesses as possible. You can apply if:

• Your business is based in the UK
• You're a limited company or partnership
• You’ve been actively trading for at least six months (there’s no hard rule on time, but more trading history helps)
• You have a consistent revenue stream that demonstrates your ability to repay

There’s no minimum turnover requirement to apply, and decisions aren’t based on rigid credit score thresholds. iwoca looks at the full picture, including your sales data, bank activity, and trading potential to give you a fair and fast decision.

If you're approved, funds can be in your account within hours. You’ll only pay interest on what you use, and there are no fees for early repayment so you stay in control of your costs at every step.

A cash flow loan is a type of short-term financing designed to help businesses manage their cash flow needs, such as covering payroll, purchasing inventory, or dealing with unexpected expenses. These loans usually have more relaxed eligibility requirements and can be processed quickly, which is great when you need fast access to funds.

On the other hand, a small business loan is a more general term that covers a range of financing options for businesses, including term loans, lines of credit, and equipment financing, among others. Small business loans can be used for various purposes, such as expanding your business, buying equipment, or refinancing existing debt.

With iwoca you can orrow up to £1,000,000 and repay over two years. If you want to repay early – we won’t charge you extra.