Definition of ‘Cash Flow Loan’
Borrowing cash typically to meet day-to-day operations or acquisitions. It is a type of debt financing, in which a bank lends funds, generally for working capital, using the expected cash flows that a borrowing company generates as collateral for the loan.
Reasons for needing a cash flow loan could be seasonal-demand changes, business expansion or changes in the business cycle.
Cash-flow loans can help in temporary situations, but if cash flow problems persist then companies need to improve their cash conversion cycle and get customers to pay faster.