Forward-Flow Funding: Right Solution, Right Time

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A smiling young woman with shoulder-length dark hair sits at a laptop computer, wearing a white t-shirt and dark apron or overalls. Behind her is a stylized graphic overlay featuring a large dollar sign symbol surrounded by blue upward-pointing arrows, suggesting forward-flow funding. The background appears to be a modern office or workspace setting.

Did You Know: In Q4 2024, Small Business profitability was stronger than the previous two years, according to the Bank of America Institute. At that time, the National Federation of Independent Business (NFIB) reported “signs of positive growth ahead, with small business optimism above average levels.” Clearly, going into 2025, business owners were optimistic. 

Months later, the 2025 outlook is showing changes based on growing economic uncertainty. A recent report from PYMNTS Intelligence reveals the challenging financial reality for many smaller businesses and uncovered stark findings that “diverse and sometimes desperate financial tactics” are being used by small and medium-sized businesses (SMBs) to sustain business during these turbulent times.   

For example: 

  • Half of the small businesses surveyed are critically dependent on day-to-day cash flow just to stay afloat.  
  • Nearly 1 in 5 SMBs are pessimistic about their odds of survival over the next five years.  
  • SMBs that are most concerned about their survival will increasingly turn to riskier personal debt when traditional financing is insufficient or unavailable. 

These findings underscore a precarious position and a vulnerability to market fluctuations. The result could be an increasing focus and adoption of forward-flow funding for the needs of small business owners (SBOs) who may not be the strongest candidate for a traditional business loan.  

The solution: forward-flow funding                          

It starts with a non-traditional premise: forward-flow funding is based on a company’s anticipated future, not traditional assets or credit history. Instead of assessing credit scores, loan eligibility and amounts are determined through a business’s projected revenue and cash flow statements. The SBO benefits from a steady source of funds, and the lender enjoys a predictable stream of assets. 

PYMNTS recently highlighted forward-flow funding’s use of “alternative data to underwrite risk” versus relying on metrics such as FICO scores, tax returns and balance sheets. Alternative data includes real-time sales, shipping volumes, payroll, and software usage patterns.  

“In the evolving world of FinTech, where algorithm-driven underwriting and alternative data are becoming the norm, small and medium-sized businesses are constantly seeking for new ways to access working capital.”  

These loans are structured as agreements where a lender commits to purchasing a set amount of a small business’s future loan originations on a recurring basis. This provides the SBO with a reliable source of capital, and the lender with a predictable stream of assets.  

This innovative funding solution gives SBOs stability, increased buying power, and faster payments. Funding can also free up capital for faster payments by transferring available funds directly to debit and credit cards via Visa Direct. SBOs can then quickly and efficiently send money to other businesses, vendors or customers (IDB Invest). 

Financial Institutions benefit as well. Funding can be used to secure credit card receivables, impacting payment cards by providing a way for an FI to access capital and then offering increased buying power to clients and cardholders. 

SBO Communications: A balance of benefits and “need to know”…                                             

With any relatively new and complex product, the challenge is finding an effective balance between education and benefit promotion moving SBOs down-funnel from awareness to adoption. This type of funding also requires clarity around product structure and mechanics, which may be new to many SBOs, particularly younger business owners. A few guidelines to keep in mind: 

Follow SBO communication best practices… 

  • Appeal to SBOs with clear and efficient communications as they are time pressed. 
  • Build awareness and educate through a variety of self-serve content—blogs, infographics, webinars. 
  • Share case studies and testimonials to build credibility. 

Focus on SBO-relevant hierarchy of benefits… 

  • Tout increased loan qualification/approvals versus traditional loans.  
  • Promote access to immediate capital: SBO gets an influx of cash based on future revenue streams. 
  • Stress flexibility: Capital can be used for various business needs, such as funding new originations or overcoming cash flow gaps.  
  • Suggest a range of use cases:  
    • Improving cash flow. 
    • Investing in new equipment.  
    • Investing in new hires. 
    • Expanding with new business.  
    • Managing ongoing day-to-day operating expenses.  
  • Speak to positive outcomes such as enhancing the overall business, improved financial health and attracting future investors. 

Approach SBO with transparency and a “need to know” filter… 

  • Explain the loan structure and mechanics.  
  • Point to clear and accessible Terms and Conditions including fees, interest rates.  
  • Prepare SBO—funders typically require rigorous due diligence.  
  • Preview ongoing reporting requirements placed on the business.