Digitization has changed the approach to business and introduced global and looming platforms to explore enormous opportunities. Now, the digital world has given new wings and colors to add to your business such as gaining popularity globally, doing digital promotions and advertisements, and earning more profits. The only thing that can limit your growth is the continuous cash flow which is a significant challenge to manage and get over. However, traditional loan suppliers and banks allow you to raise capital on their terms. Their process asks you for tedious paperwork, long durations, heavy interest, and fixed hefty installments. Here, Revenue-based Financing (RBF) comes in to help you raise capital within a short duration and without giving up equity.
Revenue-based Financing (RBF) is a substantial funding solution for digital businesses. It allows you to raise capital without the fear of equity dilution. The idea is to provide funds to a business in exchange for the business’s future revenue till a certain predetermined amount has been paid. Besides, RBF is popular with highlighting the following benefits –
- No fear of equity dilution – RBF never asks to stake equity in return for the loan amount.
- Be your boss – RBF providers never demand any signatory position on the board of directors or promoters.
- Fast process and cash disbursement: RBF Ventures has an automated and data-based process. AI system enables easy and fast cash disbursement.
- Transparent Process: The process is automated and system-based ensuring transparency between lender and finance company.
- Data-driven process: The process is clear and transparent as it is completely based on the data, previous records, and forecasted revenues.
- Flexible repayments: RBF companies offer flexibility to pay loan amounts via the percentage of future revenue.
- Professional consultation: Some RBF ventures offer consultations from experts and professionals who help you to grow and perform your business.
How To Get Fund For your Digital Business –
To get easy funding for your digital business. Let’s begin with
- An Effective Business Plan: Create a comprehensive business plan that outlines the business’s current stats, plan, growth projection, marketing and advertising strategy, revenue streams, target market, and financial projection. This will help you to project a business plan effectively and provide a clear understanding of your business.
- Identify Potential Investors: The important factor is to identify potential investors who are experienced in revenue-based financing for digital businesses. You can google your queries or can seek recommendations from your friends and family.
- Pitch Your Business: Prepare a compelling pitch that can highlight the unique proposition of your digital business. Simultaneously, explain how RBF can benefit your business as well as how your business can benefits other party too.
- Negotiate terms: When approaching investors, get ready to negotiate the terms of the RBF agreement including determining the percentage of revenue, repayment period, and so on.
- Demonstrate Traction: Investors will fund your digital business if you can demonstrate traction and provide a proven track record of generating revenue.
- Transparency and Communication: Never portray wrong information, and always be transparent with potential investors about the risk and challenges of your business. Reflect your progress and financial performance periodically to your investors to build trust and confidence.
- Documentation: Once agreed on the mutual terms, draft necessary documents outlining the terms and conditions of the revenue-based financing agreement.
Revenue-based financing helps start-ups to grow and develop. Although, it is always advisable to seek advice from financial experts or legal counsel. It is recommended to go with registered and experience brands like Vedfin.