The unexpected pandemic has expedited the transition to a more digital world and prompted changes in the consumer’s buying behavior, they tend to opt for more online shopping. Moreover, new-age customers are looking for companies that offer unique and personalized products. This shift in the preferences of consumers has generated a market for direct-to-consumer (D2C) brands removing the barrier between vendors and consumers.
Direct-to-consumer allows brands to respond quickly to change client expectations and provides them with one of the best kinds of experiences which distinguishes them from the other competitors. Simultaneously, RBF is becoming the go-to fundraising method for DTC businesses, looking to fund growth expenses. The approach has softened the method of basing business, going online, establishing the brand, and earning profit. It has introduced a new era of direct relations between seller and buyer via eliminating the between segments. Here, are the reasons mentioned why RBF is exploring market and growth opportunities for D2C brands –
- Fast and Easy Accessible-
Unlike other funds and bank loans which might take more than half a month of signing the terms sheet to release the funds and with RBF, you can secure the funds within a week. It’s a machine-driven underwriting and doesn’t require any lengthy documentation, therefore funding can be finalized in fewer days. It’s not necessary that your business needs to be profitable, it only needs to be revenue-generating for a secure RBF. Once the D2C brand secures RBF, the funding can be used to manage its day-to-day operations. The brands will also be in a better position to seek larger amounts of funding from venture capitalists and banks.
The repayments linked to RBF are based on the performance of your business. When your sales are high you pay more and when your sales are low you pay less. This means to overcome your post-holiday sales lump you will always have sufficient working capital. You can also repay the entire amount quicker if the business does well.
- No Dilution Required-
This is the biggest reason RBF is growing in preference. It becomes difficult for the startups to obtain equity funding as the proposals for the small amount of funding they require would not be entertained by the funding ventures. Funding is usually given in exchange for valuable equity when it comes to larger amounts. On the other hand, RBF investors do not seek equity which means no equity dilution or personal guarantees are required. You can retain full control over your business.
- Mutual Benefit-
Financiers also have benefits in this game but their benefit depends upon the growth of the business. Since the financiers charge a fee on the borrower’s future revenue so when there is a drop in the latter’s earnings then the drop is in the financier’s fees as well. Therefore, the brand’s growth and relationship are one of the mutual benefits of the financiers.
A growing business always needs several sources of capital to expand and sustain for which RBF has become a sustainable solution. A simple and flexible solution for changing business models and dynamic funding requirements. So, how your business needs RBF and how it could help you, experts at Vedfin are available to assist.