Business Funding Based on Revenue
What is Revenue-Based Business Funding?
Revenue-based business funding (RBF) is a type of financing that allows businesses to raise capital by pledging a percentage of their future revenue to the investor. RBF is different from traditional debt financing in that it does not require the business to put up any collateral, and there are no fixed monthly payments. Instead, the business simply pays the investor a percentage of its revenue each month until the loan is repaid.
How does revenue-based business funding work?
The first step in obtaining RBF is to find an investor who is willing to fund your business. There are a number of RBF investors operating in the market, and they typically have different criteria for the businesses they invest in. Once you have found an investor, you will need to negotiate the terms of the loan, including the interest rate, the repayment period, and the percentage of revenue that you will pay to the investor each month.
Once the loan terms have been agreed upon, you will need to sign a contract with the investor. This contract will outline the terms of the loan and the rights and obligations of both parties.
Once the contract is signed, the investor will release the funds to you. You can then use the funds to finance your business's growth.
Benefits of revenue-based business funding
There are a number of benefits to revenue-based business funding, including:
- No collateral required: RBF does not require businesses to put up any collateral, which can be a major advantage for startups and businesses with limited assets.
- Flexible repayment terms: RBF loans typically have flexible repayment terms, which means that you can pay the investor back based on your revenue performance. This can be helpful for businesses that have seasonal revenue fluctuations.
- Access to capital: RBF can be a good way for businesses to raise capital that would not otherwise be available to them. For example, startups and businesses with poor credit may be unable to qualify for traditional loans, but they may be able to obtain RBF.
Drawbacks of revenue-based business funding
There are also some drawbacks to revenue-based business funding, including:
- Higher interest rates: RBF loans typically have higher interest rates than traditional loans. This is because the investor is taking on more risk by lending money to a business without any collateral.
- Repayment burden: If your business's revenue declines, you may have difficulty repaying the RBF loan. This can lead to financial stress and could even force you to close your business.
- Loss of equity: RBF investors typically require businesses to give them a percentage of equity in exchange for the loan. This means that you will own a smaller portion of your business after you repay the loan.
Who is revenue-based business funding for?
Revenue-based business funding is a good option for businesses that:
- Are unable to qualify for traditional loans
- Need to raise capital quickly
- Have a strong track record of revenue growth
- Are willing to give up some equity in exchange for funding
How to apply for revenue-based business funding
To apply for revenue-based business funding, you will need to provide the investor with the following information:
- Your business plan
- Your financial projections
- Your historical financial statements
- A list of your assets and liabilities
- A description of your team and their experience
The investor will review your application and then decide whether or not to offer you a loan. If the investor approves your loan, you will need to sign a contract with them outlining the terms of the loan.
Tips for getting approved for revenue-based business funding
Here are a few tips for getting approved for revenue-based business funding:
- Have a strong business plan: Your business plan should be well-written and should clearly outline your business goals, strategies, and financial projections.
- Have a good track record of revenue growth: Investors are more likely to approve loans to businesses that have a good track record of revenue growth.
- Have a strong team: Investors want to see that your business has a strong team with the experience and skills necessary to execute on your business plan.
- Be prepared to give up some equity: RBF investors typically require businesses to give them a percentage of equity in exchange for the loan.
Conclusion
Revenue-based business funding can be a good option for businesses that need to raise capital quickly and are unable to qualify for traditional loans. However, it is important to weigh the benefits and drawbacks of RBF before applying for a loan.
List of Companies on Revenue-Based Business
Clearco
Clearco is a revenue-based financing company that offers capital to businesses in exchange for a percentage of their future revenue. The company was founded in 2015 and has since funded over 3,000 businesses. Clearco offers loans ranging from $10,000 to $10 million, and the repayment period is typically 12 to 24 months.
Pipe
Pipe is a revenue-based financing company that offers businesses the ability to sell future revenue to investors. The company was founded in 2019 and has since raised over $150 million in funding. Pipe offers businesses the ability to sell up to 50% of their future revenue, and the repayment period is typically 12 to 24 months.
Fundbox
Fundbox is a revenue-based financing company that offers small businesses short-term loans. The company was founded in 2013 and has since lent over $1 billion to businesses. Fundbox offers loans ranging from $1,000 to $250,000, and the repayment period is typically 2 to 6 weeks.
Founderpath
Founderpath is a revenue-based financing company that offers startups capital in exchange for a percentage of their future revenue. The company was founded in 2017 and has since funded over 1,000 startups. Founderpath offers loans ranging from $10,000 to $1 million, and the repayment period is typically 12 to 24 months.
Lendio
Lendio is a marketplace that connects small businesses with lenders. The company was founded in 2011 and has since helped over 100,000 businesses secure financing. Lendio offers a variety of loan products, including revenue-based financing.
Kabbage
Kabbage is a financial technology company that offers small businesses loans and lines of credit. The company was founded in 2009 and has since lent over $10 billion to businesses. Kabbage offers revenue-based financing, as well as other types of loans and lines of credit.
OnDeck
OnDeck is a financial technology company that offers small businesses loans and lines of credit. The company was founded in 2006 and has since lent over $10 billion to businesses. OnDeck offers revenue-based financing, as well as other types of loans and lines of credit.
BlueVine
BlueVine is a financial technology company that offers small businesses loans and lines of credit. The company was founded in 2013 and has since lent over $5 billion to businesses. BlueVine offers revenue-based financing, as well as other types of loans and lines of credit.
Avant
Avant is a financial technology company that offers loans and credit cards to consumers. The company was founded in 2012 and has since lent over $10 billion to consumers. Avant offers revenue-based financing to businesses, as well as personal loans and credit cards.
LendingClub
LendingClub is a peer-to-peer lending platform that allows investors to lend money to borrowers directly. The company was founded in 2007 and has since originated over $100 billion in loans. LendingClub offers revenue-based financing to businesses, as well as personal loans and business loans.
Prosper
Prosper is a peer-to-peer lending platform that allows investors to lend money to borrowers directly. The company was founded in 2005 and has since originated over $20 billion in loans. Prosper offers revenue-based financing to businesses, as well as personal loans and business loans.
PeerStreet
PeerStreet is a real estate lending platform that allows investors to lend money to real estate developers directly. The company was founded in 2014 and has since originated over $1 billion in loans. PeerStreet offers revenue-based financing to businesses, as well as real estate loans.
Groundfloor
Groundfloor is a real estate lending platform that allows investors to lend money to real estate developers directly. The company was founded in 2013 and has since originated over $1 billion in loans. Groundfloor offers revenue-based financing to businesses, as well as real estate loans.
StreetShares
StreetShares is a financial technology company that offers loans and lines of credit to veteran-owned businesses. The company was founded in 2013 and has since lent over $500 million to businesses. StreetShares offers revenue-based financing to businesses, as well as other types of loans and lines of credit.
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