The conventional finite difference (FD) schemes are based on the low order polynomial approximation in a local region. This paper shows that when the polynomial approximation is replaced by the multiquadric (MQ) function approximation in the same region, a new FD method, which is termed as MQ-FD method in this work, can be developed. The paper gives analytical formulas of the MQ-FD method and carries out a performance study for its derivative approximation and solution of Poisson equation and the incompressible Navier-Stokes equations. In addition, the effect of the shape parameter $c$ in MQ on the formulas of the MQ-FD method is analyzed. Derivative approximation in one-dimensional space and Poisson equation in two-dimensional space are taken as model problems to study the accuracy of the MQ-FD method. Furthermore, a lid-driven flow problem in a square cavity is simulated by the MQ-FD method. The obtained results indicate that this method may solve the engineering problem very accurately with a proper choice of the shape parameter $c$.