What is cash flow finance?
Cash flow finance refers to funding solutions that help businesses manage the gap between outgoing expenses and incoming revenue. It’s designed to keep operations running smoothly, whether you’re paying staff, purchasing stock, or investing in growth.
Even if your business is profitable, timing issues or delayed payments can create cash flow issues. A cash flow loan can give you the flexibility to act when needed, without being held back by gaps in working capital.
For example, if you invoice clients but only get paid once a project is complete, you may still need to cover the upfront cost of materials, equipment, or labour. Cash flow finance helps bridge that gap, allowing you to complete the work and repay the loan once the funds come in.
What can a business cash flow loan be used for?
A business cash flow loan can be used for a range of business needs, typically when cash flow is needed to complete a specific transaction. Here are some common uses for a cash flow loan:
- Managing seasonal cash flow fluctuations
- Purchasing new equipment or inventory
- Covering payroll
- Hiring new employees
- Moving premises
- Emergency expenses, such as urgent repairs
Why might your business need a cash flow loan?
Even profitable businesses can experience cash flow pressure from time to time. Here are some of the common reasons your business might need to access cash flow finance.
Low profit margins
If your business is generating revenue but struggling with profitability, a cash flow loan can help keep things moving while you focus on improving margins. This is a common issue, especially for start-ups, who are yet to establish themselves in the market.
High overheads
Rising operating costs, including supplier fees and utility bills, can put an unexpected strain on your business’s finances. A short-term cash flow loan can help give you breathing room while you adjust your budget or take measures to reduce costs.
Poor planning
Planning is vital to managing finances, and a lack of accurate forecasting can result in cash flow problems. If you misalign payments going out with revenue coming in, cash flow finance can cover the gap. If this happens, review your planning to avoid similar issues in the future.
Late invoices
As one of the most common factors that result in businesses needing a cash flow boost, late invoices can be detrimental and difficult to manage. If you have funds outstanding in invoices, applying for cash flow finance can help you bridge the gap while you wait for the money to come in.
What are the different types of cash flow finance?
Cash flow finance is used to describe several separate business funding products that we can offer at Aurora Capital, including:
VAT/Tax loans
- Loans up to £85,000
- Paid directly to HMRC
- Terms over 12 months
Managing VAT and corporation tax bills can put pressure on cash flow, and depending on how much you earn as a company, you may need to pay at the end of each quarter.
VAT/Tax business loans are a short-term finance facility designed to help you keep on top of your HMRC obligations without impacting your cash flow. We can raise up to £85k in a matter of hours, allowing you to get on with your daily tasks.
Many lenders can send the funds straight to HMRC on your behalf and structure repayments over 1-12 months. Other lenders may offer a simple unsecured business loan you can use to pay your bill.
Invoice finance
- Facilities up to £2 million
- Selective and whole ledger facilities
- Raise up to 90% of the invoice value
If you have money tied up in unpaid invoices, invoice finance could provide the funding your business needs to maintain operations.
Invoices can take weeks or months to complete, and when left unpaid, they can create serious cash flow gaps. Invoice finance enables a quick cash injection to get your business on its feet and moving in the right direction.
You can receive up to 90% of your unpaid invoice amounts without the need for a personal guarantee or credit check. If you have clients with a good record for paying bills, invoice finance could be your best option for getting cash fast.
Revolving credit facilities
- Make multiple drawdowns
- Terms up to 2 years
- Only pay for what you use
A revolving credit facility gives your business flexible access to funds, allowing you to withdraw, repay, and reuse credit as needed over an agreed term. Unlike a traditional business loan, you won’t need to reapply each time you need funding.
You’ll agree to a limit based on affordability tests and your business credit rating, and have access to that amount until the end of the term or you decide to end the service.
You only pay interest on the amount you use, making it a cost-effective way to maintain cash flow without committing to a full loan amount.
Trade finance
- Line of credit up to £3m
- Extend supplier credit terms up to 150 days
- Completely unsecured
Trade finance is designed to help businesses fund the purchase of stock, materials, or goods, whether they trade locally or internationally. It can be beneficial when working with suppliers who require upfront payment before goods are shipped or released.
With a trade finance facility, the lender pays your supplier directly, allowing you to secure the goods you need without tying up your own cash. Repayment terms can be extended to up to 150 days, giving you time to receive and sell the stock before settling the balance.
Trade finance allows the buyer to honour a large wholesale order and enables the seller to fulfil the order without any risk.
What are the limitations of cash flow finance?
As with any business loan, there are some limitations to cash flow finance that you should be aware of, including:
- Higher fees: Cash flow loans can have higher interest rates than traditional loans. It’s important to ensure your business can manage the repayments and any fees without creating further pressure on your cash flow.
- Personal guarantees: Most types of cash flow loans do not require collateral, but a lender may request that you sign a personal guarantee, which makes you personally liable for the loan repayment.
- Fixed, automatic repayments: Many lenders require repayments to be made automatically on a set schedule. While this ensures regular payment, it also means you need to make sure you have sufficient funds available when each payment is due.
- Shorter repayment terms: Cash flow loans are designed as short-term solutions, with repayment periods ranging from a few months to a year. This can lead to higher monthly repayments.
If you’re considering applying for cash flow financing, be sure to consider these limitations before you agree to terms with your lender.
At Aurora Capital, we’ll help keep things as transparent as possible and ensure you aren’t caught out by additional fees or time constraints.
How to apply for a business cash flow loan
Cash flow finance covers a range of funding options, so the first step is to decide which product suits your business needs. Whether you’re covering a VAT bill, fulfilling an order, or bridging a short-term gap, the right solution will depend on the purpose, loan amount, and your business’s financial profile.
Eligibility will vary by lender and product. For example, trade finance typically requires a turnover of around £1 million, though some lenders will consider smaller businesses depending on the order size and end buyer. Each product has its own criteria, which our team can guide you through.
When you’re ready, you can apply online using our short application form. We can then match you with lenders that meet your needs, and in many cases, funds can be released in just a few days.
Why choose Aurora Capital for cash flow finance?
Aurora Capital has years of experience helping UK businesses secure fast, flexible funding to support growth, cover costs, or navigate unexpected cash flow challenges.
Our powerful decision engine pairs businesses with trusted lenders offering competitive rates, flexible repayment terms, and a wide range of product options.
We take the time to understand your goals and match you with financing that works for your situation, without the stress of searching through providers yourself.
