Shopping during the festive season is a traditional approach that brings drastic revenue fluctuation. This fluctuation is quite easy to manage for progressive businesses, but difficult for startups and growing organizations. Every businessman has some sort of financial planning to deal with, ranging from managing inventory to earning profits. However, the situation is not the same for all businesses, especially if the business is d2c and seasonal. Seasonal businesses that are at their best this season may even close in another year, which requires consideration of the importance of cash flow and adequate financial planning.
During festive seasons, many entrepreneurs struggle to avail funds to meet the high product demands. Simultaneously other factors like finite access to financial resources, managing cash inflow and outflow, and existing supplier chains are unavoidable and often prevent businesses from dabbing into the surging market. The situation discourages businessmen to grow and remain standing in this risky trade environment. Fortunately, RBF has emerged as an alternative funding option that grants required capital for general operations, marketing, and advertising spending.
So, What is RBF?
RBF (Revenue-Based Financing) always acts as a catalyst for the growing organization. It is a means of obtaining credit based on the existing revenue of the business. It is an alternative to debt financing and the repayment format is based on a profit-share structure. RBF helps an entrepreneur with –
- Easy collateral-free growth capital
- Get capital without incurring interest
- No hassle to pay a fixed EMI as the payment term is based on profit earned.
- No equity dilution as it does not require equity or any guarantee to keep on stake.
- Sufficient time to repay the credit up to 12 months or based on the agreement.
Can I Opt for RBF?
RBF is again a loan like any other funding option so it is important to understand whether it suits your business’ needs or not. Will it satisfy short-term goals or will help you with long-term value? Let’s answer the below questions to understand if RBF is perfect for your business’s financial needs –
- Sufficient Cash Flow – RBF demands a certain percentage of monthly revenue so you need to analyze revenue vintage and a steady cash flow to qualify for potential funding.
- Retain Maximum control – The best thing about RBF that makes it unique is it doesn’t control and allows businessmen to run organizations on their terms without putting up collaterals, diluting equity, and giving up board seats. It allows founders to control their destiny.
- Quick Capital Injection to Scale – RBF provides easy access to the fundraising process. With brands like VedFin, you can get funds within 3-4 days after fulfilling the application.
How to Manage Cash Flow in a Seasonal Business –
Simultaneously, experts from VedFin suggest a structured way to manage cash flow in seasonal businesses that includes –
- Alternative business in the off-season.
- Develop strong relationships with vendors and banks.
- Save earnings and profits during season time.
- Forecasting always works so try to forecast a good cash flow with the analysis of previous data, available funds, and costs throughout the year.
- Track a record of cash flow, monthly sales, units, product lines, and other spending.
- Ensure the forecast includes the consideration of sales on account, credit payment, managing inventory, debt repayment, and asset replenishment.