Both are repaid over an agreed period, but they are underwritten differently. A cash flow loan is assessed mainly on your trading performance and the cash your business generates, rather than on assets pledged as security. A traditional term loan is often secured against property or equipment and may be offered over a longer period.
Because a cash flow facility relies on trading rather than collateral, lenders scrutinise bank statements, filed accounts and management information closely. They may also want personal guarantees from directors. Pricing generally reflects the additional risk the lender is taking, so an unsecured facility usually costs more than a comparable secured one.
Term loans secured on assets can suit larger, longer-term investment where the asset itself supports the borrowing. Cash flow facilities tend to suit shorter-term needs — a tax bill, a stock purchase, a gap between paying suppliers and being paid by customers.
Neither is automatically better. The right choice depends on what the money is for, how quickly you expect to repay it and what security you are willing to give. Missing repayments on either can damage your credit profile and put any secured assets or guarantees at risk. CWAF is an independent credit broker with a panel of over 60 lenders and can compare structures for you, but the lending decision always rests with the lender.