 |
Definition of 'Cash-Flow Financing'
A form of financing in which the loan is backed by a company's expected cash flows. This differs from an asset-backed loan, where the collateral for the loan is based on the company's assets. The schedules or repayments for cash-flow loans are based on the company's projected future cash flows. Debt covenants on these loans are typically focused on adequate levels of EBITDA growth and margins, as well as manageable levels of interest expenses.
Also known as "Cash-Flow Loan".
|
 |
Investopedia explains 'Cash-Flow Financing'
Cash-flow financing is often used by companies seeking to fund their operations, or acquire another company or other major purchase. Companies are essentially borrowing from cash flows they expect to receive in the future by giving another company the rights to an agreed portion of their receivables. This allows companies to obtain financing today, rather than at some point in the future. Timely operational expenditures, such as meeting payroll requirements, would be one reason for cash-flow financing.
|
-
Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
Read More »
-
Differences between accrual accounting and cash flows show why net income is easier to manipulate.
Read More »
-
A company's efficiency, financial strength and cash-flow health show in its management of working capital.
Read More »
-
|
|
