The funding process requires due persistence at every step to put out the income, expenses, and milestones based on one’s risk-taking capacity. Though, there are some thumb rules that one may use to know more about funding every time. Once accustomed to the rules, a proper funding method should be followed to bring revenue with the goals.
1. Equity or Debt?
The generation of growth at any cost is over. Venture capital firms tell firms to reduce burn extends to cost-cutting and laying off employees. The conclusion is that a funding slowdown is occurring, and as we know about it. It does not mean companies should start slowing down their businesses and even close them off.
Across businesses, equity funding has been preferred over decades, and it is fine, but we should not turn a blind eye to another way of financing too. The bigger narrative should not be about equity and debt together.
The deployment of equity capital vs debt capital differentiates depending on the industry. Hence, any firm needs sources of capital to grow and scale sustainably.
2. Revenue-Based Financing – Leading Financing Option
Think of it like you choose to keep certain subscriptions active for apps and tools which provide basic service (capital, in this case), but the functionality offers more convenience and personalization. Like ad-free music on Spotify, ad-free videos on YouTube, extra swipes, or super likes on Tinder/Bumble, etc. Revenue Based Financing gives you induced power over your liquidity so you can change cash flows towards business priorities during down months & pay higher percentages of principal amount during upfront months. It is fast and founder-friendly. It’s best when you have looping revenues and have a high RoI use case designed to deploy the funds you have raised until now.
3. Infinite Success Stories
Many businesses around sectors have successfully deployed funds raised through Revenue Based Financing. One of India’s most famous fashion brands channeled ~16.5 Cr. over 7 rounds to develop a digital marketing engine & launch a knockout influencer campaign to increase sales exponentially around the festive season. Another example is India’s leading coffee shop chain unlocked growth via offline store expansion from 15 to 35 stores through 6 funding rounds and ~6.5 Cr in huge.
4. Increasing Revenues During The Festive Season
Revenue Based Financing has been used during the festive season by D2C brands and cloud kitchens because a flexible injection of capital unlocks great return on investment for brands as they spend working capital on inventory management, marketing, influencer onboarding, and advertising. Smaller tenure RBF arrangements can help with working capital and bigger growth plans like offline expansion or product launches. It can be funded through longer tenures of RBF and moving credit lines.
5. You Can Start Whenever You Want To
The motivation to become an entrepreneur is to capitalize on innovation to move off things that have not come out before, roots in their experimental and free nature. Leveraging new capital products to employ a new method of funding your growth is how businesses grow.
Along with adapting rules, one must take an expert review of your company’s growth and ought for financing. Hereby, introducing the best revenue-based financing firm Vedfin which believes in your company and its multifold potential. Vedfin is well-equipped with an AI-based automated process that fulfills all your financial needs.