I think what you are referring to, Joel, might be called Deficit Financing. I don't recommend it!
Now that I'm retired, I have no need for "business financing" but back in the day when I owned and managed a construction company all work was financed out of project cashflow - you do work, you get paid, you pay your men, you buy materials, you do more work, you get paid....
The big thing for me was our Monthly Cashflow Projection. Every month I would project the next 12 months cashflow - I would anticipate each month's expenses (labor, materials, overheads) and each month's income (progress payments.) I would set this out for the coming 12 months, and do this exercise every month.
Obviously, the further out you prjected, the less accurate and more of a guess it was, but the next month or two could be pretty accurately projected. So, I would know very accurately when and why I might be short of cash, and by how much. Which means I could take steps to prevent it.
I would send a copy of this to my bank manager, even though it wasn't necessary, they didn't ask for it, and I had no loans to justify it. But still they were sent a copy, every month. And there were one or two occasions I had to phone the bank on a Thursday afternoon to say we were not able to meet Friday's payroll, why we couldn't (an anticipated payment hadn't arrived), pointed to the specific payment on the Cashflow Projection - and each time the bank manager gave us the greenlight to pay the men saying they would cover it.
Demonstrating you run a tight and efficient ship can go a long way with a bank manager. We didn't start out in debt and we didn't run our business on debt. And I am eternally grateful for the bank manager that refused my first application for a loan. It made me find another way - a better way - Positive Cash Financing.
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