The era has witnessed the maturity of the Indian startup ecosystem at a large scale with the emergence of a new class of capital. The recent funding solution that has gained immense popularity among Indian startups is Revenue-based Financing (RBF). RBF emerged as a new heavyweight in the financing ring and financed various forward-thinking and ambitious companies.
What is Revenue-Based Financing?
Revenue-based Financing (RBF) is a non-dilutive type of financing, a new way for growing and developing companies to access capital with the flexibility of repayment as a percentage of future revenue. It can be used as an alternative or in addition to other financing options that include bank loans, equity funding, or VCs. However, these traditional forms of finance have constraints of inflexible conditions, hefty installments, guarantees, fear of equity loss or ownership, and long processes. If the company opts for RBF, the company pays a percentage of future monthly revenue for a pre-decided period of time.
How successfully does RBF Work?
Revenue-based financing ventures like Vedfin, India’s leading RBF provider firm, offer RBF the percentage of future revenue. At the time of application and process, investors and lenders agreed on the financial terms including the amount of revenue share, duration of repayments, flexibility, and anticipated sales volume.
The process begins with the online application on a portal that processes the data collection and analysis through AI-based software. The software processes the data, verifies it, and offers customized loan offers for the applicant. RBF offers finance without any personal guarantee, equity, and the hassle of monotonous paperwork.
Advantages of RBF-
Revenue-based financing offers personalized loan offers evaluated on the data with the advantages of –
- Fast and smooth application through online portal
- Easy loan approval with equity or guarantee
- Data-based lending process
- No equity dilution
- No hefty installments
Why RBF Than Bank Loans and VC Funding –
RBF is preferable for startups and SMEs compared to the traditional form of financing on the below factors
| Factors | Bank Loans | RBF | Venture Capital |
| Flexible Repayments | ☑️ | ||
| Maintain Control | ☑️ | ☑️ | |
| No Guarantees | ☑️ | ☑️ | |
| Retain Equity | ☑️ | ☑️ | |
| Large Amount of Funding | ☑️ | ☑️ | |
| Ease of Access To Capital | ☑️ | ||
| Instant Disbursal | ☑️ | ||
Through this comparative chart, you can explore the benefits of RBF to your growing business looking for capital.
Determine if RBF suits your Business –
Pick the form of financing that is convenient and cheaper for you. The main factor to determine if Revenue-based Financing is good for your business is to evaluate the cost involved. Although, it is difficult to analyze the accurate valuation of non-quantitative issues associated with your account.
- Revenue Model –
Check if the business has a consistent and predictable revenue stream and generates stable and recurring revenue.
- Fund Usage-
RBF is flexible and can be utilized for various purposes such as product development, marketing, working capital, or expansion. Check if your fund usage aligns with the RBF.
- Repayment Structure-
The best part of RBF is the flexibility of repayment. Ensure that the percentage of revenue aligns with the cash flow. Also, analyze your profit margin and determine if you can repay while maintaining the profit.
- Legal and Regulatory Consideration-
Be aware of the legal and regulatory considerations associated with RBF. Seek legal advice if there is a need to navigate the terms and conditions. Exit strategy also plays a major role if it aligns with the long-term business plan.
- Choose the Best –
After exploring various financing options, you can make an informed decision to choose the RBF providers who understand your industry and business model. Ved India Pvt Ltd is one of the leading RBF providers that believes in your promising future and assists through robust technology. To know more, apply here.