Revenue-Based Financing

How it works —

A financier provides you with a fixed financing amount and you pay a fixed percentage of ongoing revenues to pay it back. The payments increase and decrease based on business revenue. These payments continue until the initial amount, plus a multiple (also known as a cap), is repaid.

Example —

You receive $100k from a financier and agree to pay 5% of monthly revenues until you pay back a total of $150K.

You Might Be A Fit If —

  • You have predictable monthly revenue.
  • You have consistently high gross margins.

Why You Would Use This —

  • Unlike most loans, there are no fixed payments. Payments scale up and down based on the growth of the business. 

  • Payback periods are driven by revenue growth of the business and are typically longer than comparable financial products.

Things to Watch Out For —

  • If your revenue grows very quickly, so do your payments. This will pay the loan off faster and with a fixed repayment cap, this will mean a higher annualized cost of capital. 

    • If you are comfortable with the total repayment amount, this will not change based on your growth. 

  • The company immediately starts paying back the loan as the business receives revenue.

    • Make sure you are willing to give up the agreed-upon percentage of revenue and your gross margins are high enough to support the financing costs.

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Recurring-Revenue Lending

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Venture Debt Term Loans