7 questions a cash-flow lender wants answered before investing – by one!
By Stephen Galvin
Cash-flow lending is a key source of finance for businesses that
are looking for funding, but have little or no security.
These loans can be used for a range of needs from
short-term project finance to working capital to supporting
ownership changes such as Management Buy-Outs (MBOs).
To take advantage of this type of funding you’ll need to
convince the lender you/your business are worth taking a risk
Based on our experience, here are seven questions a cash-flow
lender will ask you before deciding whether or not to provide you
1. How reliable is your business’
If a lender is making an investment decision on a company’s
ability to generate cash, they’ll want to see reliable
cash-flows. Good cash-flows are predictable and therefore
easier to forecast, robust enough to stand up to scrutiny and
generated quickly and in a timely manner.
2. How strong is management
Equally as important as cash-flow is the management team.
Experienced teams with a proven track record will always impress a
potential funder, while a unified and well-rounded team with no
obvious gaps will show a lender you’re well equipped to handle any
3. What is the opportunity?
In addition to the cash-flow and the management team what are
the details of the investment you need? Ease of delivery and
a quick turnaround will always be attractive to a lender while
potential follow-on opportunities can help bolster your business
4. What is the company’s heritage?
Age matters and is worth emphasising! A business that has been
around for a long time is often regarded as lower risk. If
your business operates in established markets and sectors, these
are also much easier for lenders to understand and will help to
build their trust.
5. Where is the business positioned in the
A strong market position is crucial and demonstrates to
investors that external factors are on your side. If your
business is market-leader, this puts you in a strong position,
allowing your business to drive the market and create barriers
to entry for potential competitors. All of this can have a
direct impact on your business’ ability to grow and flourish.
6. Is the growth plan realistic?
Is your predicted growth realistic and achievable? Can your
management team achieve their goals? Your growth plan needs to
provide accurate and convincing answers to these types of
7. Does the management team show
When a lender speaks to a management team, they’ll be expecting
them to demonstrate a real desire to achieve. They’ll want to
hear about a strong vision, where the management team wants to be
in 2-3 years’ time and how they plan to get there. Moving a company
forward isn’t always an easy ride, so it’s important for a lender
to see you’re up for a challenge!
Cash-flow lending opportunities
Cash-flow lending levels have improved over the last few years,
but some lenders still need convincing. At Finance Wales, we work
with all the major lenders, but also have the ability through our
funds to be highly flexible when structuring finance solutions. We
regularly provide cash-flow loans for Welsh businesses supporting a
full range of SME investment needs.
If you would like to enquire about a cash-flow loan from Finance
Wales visit our funding needs