Flow-based lending is generally associated with mid to large-sized corporates. In simple terms, it means access to credit based on cash flow patterns in a business, which is often irregular. A borrowing line of credit is offered to a corporate after careful analysis of fund inflows and outflows. The estimation and assessment of exposure a lender can take on the borrower get better with the amount of historical data available for analysis. This is augmented by forecasts produced by the application of machine learning algorithms. Business and corporate loans are backed by collateral in order to offset risk and mitigate loss arising out of potential defaults.
