REVENUE
BASED
FINANCING

Revenue based financing involves investors agreeing to provide a company with capital in exchange for a percentage of its ongoing gross revenue. It is an attractive option for many businesses as it does not require the company to sacrifice equity or put up its assets as collateral. It also requires less documentation which makes for an easier, less time-consuming process.

The revenue based financing structure is similar to debt financing because the company will be providing investors with regular payments in return for their initial capital. However, it does not require any interest. You also won’t have to offer up collateral to investors or transfer ownership as you would in an equity model.

Platforms that provide funding will usually approve amounts that range from $10,000 to $10 million. Repayment is typically flexible so you can make higher payments when revenue is good and lower payments on slower months.

Revenue based financing can be useful in the following situations:

•   Your company is growing quickly, and you need more money to meet marketing needs and inventory demand.
•   Your company is planning to expand and, while you have enough cash flow to stay afloat, you are not in a position to raise capital from investors, and you don’t want to give up equity.
•   Your company just got a big order and does not have the funds to fulfill it, or it requires funds to fulfill it while maintaining abundant capital for optimal liquidity
•   Your company has raised a seed round of investment, but you are setting it aside to meet capital needs and you need extra money to grow.

Revenue based financing is used as a form of growth capital. There may be limitations on what you can use the money for put in place by the lender. In most instances, you can use it for a variety of business needs including marketing, sales, development, hiring staff and more.

When you compare revenue based financing to other types of loans, you may find it comes with its share of advantages.

It is preferable to venture capital which involves investors putting huge amounts of company in a business they believe in. This type of funding is terrific for getting expansion off the ground, but it comes at a high cost. It also often requires the company to give up equity and provide seat board control to investors.

RBF may also be easier to acquire than a bank loan as it does not require as much documentation which prolongs the approval process.

No, RBF differs from a loan in many ways. For example, it does not require interest or fixed payments. Rather, payments are proportional to revenue. It also does not involve collateral.

Debt financing involves the company raising money by selling debt instruments to investors. These include fixed income products like bonds, bills, or notes. It is a good option for some businesses because it does not require the company to give up equity.

However, RBF has its advantages over debt financing. For one, it only takes a portion of the revenue to recover the amount funded. This eliminates the pressure of paying fixed monthly installment.

Other benefits it offers over debt financing include:

•   A more streamlined application process
•   No collateral required
•   Fewer covenant restrictions

Equity financing is the process of raising capital by selling shares of the company. Once you get into an equity financing situation, the lenders are brought on as shareholders of the business. They will have their say in business decisions and they will continue to collect profits until the relationship is terminated.

With RBF, only a small percentage of the business is shared with the investing platforms and ownership remains intact.

Generally, requirements for revenue based financing include the following:

•   An annual revenue of $200,000 or higher
•   A consistent revenue with high gross margins (typically a revenue of at least $15,000 a month with growth margins of at least 50%)
•   Profitability isn’t always required but it’s recommended for businesses to at least have a defined path to profitability
•   Little to no existing debt
•   Company diversity in that you are supplying products of services to at least five clients
•   Location may also be taken into consideration; some platforms will only provide funds for businesses in certain countries

RBF is mostly exclusive to SaaS and technology companies as well as subscription-based businesses. And because the financing is largely based on sales and revenue instead of credit score and business history, revenue based financing for startups is a common option.

Revenue based financing does not fit every business model. As previously mentioned, it is typically used for technology, SaaS and subscription-based businesses. If your company does not fall into one of these categories, you may have a hard time getting approved for Revenue Based Financing.

try Kickfurther;

However, if you do meet the category requirements, you may find that Revenue Based Financing is a terrific option. It eliminates the fixed loan payment structure which can be stressful and may even inhibit your business’s growth.

It also does not require you to give up equity which means you can retain 100% of ownership in your business.

Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.

Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.

Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.

Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. And by funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

If you need inventory funding, you should use Kickfurther. At Kickfurther you can get funded within minutes. Here’s how to get started:

• Create a free business account
• Complete the application online
• Review a potential deal with one of our account reps
• Get funded in minutes (funding times may vary)

When you set out in search of financing for your business, you’ll find there are several options to choose from. While research can require a time investment, it pays to fully understand all of your financing options. While revenue based financing may be the best option for some companies, it’s not the best option for all companies. We hope you better understand what revenue based financing is, as well as what other options may include.

Need funding? Visit Kickfurther today!

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