From equipment and inventory financing to a business line of credit and merchant cash advances, lenders have various loan and funding options available for small to medium-sized businesses (SMBs). However, things like the global pandemic, supply chain issues, geopolitical conflicts, inflation, and talks of a recession have forced lenders and borrowers to take more conservative loan options, like Revenue-Based Financing (RBF).
Revenue-based loans are becoming more popular among people with SMBs because they tend to have cheaper and more flexible repayment terms. Clearco (formerly Clearbanc) co-founder and president Michele Romanow researched that in 2022, business leaders are opting for RBF over traditional financing methods.
Let’s explore why RBF is a good funding option for your company.
What is RBF?
RBF is a revenue-based financing service that helps you to get the capital to meet your business requirements like sales and marketing initiatives, expansion of operational units, and more.
Unlike other funding options, RBF allows businesses to avail funds during their budding stage with the following benefits-
1 – RBF is less costly than other financing options like debt and equity financing. SMB owners undertake higher control and ownership. On the other side, lenders prefer revenue-based loans since they have the power to produce substantial returns with relatively little risk. Also, the financier and company have fixed goals to grow revenue.
2 – RBF ensures a share of a business’s future revenue to the financier until reached to the predetermined amount. This amount is the value of the original loan plus a fixed fee.
3 – It is easily affordable as borrowers do not have to pay large repayment because they only owe a percentage of monthly revenue.
4 – It is a good option for SMBs, small investors, and venture capital networks having low credit scores, few assets, and no access to traditional financing options.
5 – RBF providers provide funds in a short period.
6 – For lenders, Revenue-based financing can be very profitable. It provides loan accessibility to businesses and the rate with which lenders can choose borrowers, and it allows lenders to give away more loans.
Is RBF a good funding option for your company?
The new technology can help lenders offer revenue-based financing options and induce their pool of qualified commercial customers. If your company falls in any of the above categories and you are looking for an instant hassle-free funding option, Yes! RBF is for your company. For vendors looking to expand their SMB loan offerings, do visit vedfin.io.