Revenue-Based Financing
  • September 9, 2022
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The popularity of online business is not a new story. The big players such as Amazon, Myntra, Flipkart, and others in the last few years have been expanding rapidly. The COVID-19 pandemic has accelerated the growth and highlighted the conveniences of online shopping which is accessible over a single click. The inclination toward online growth is increasing the competition between the offline and online market, while an unpredicted and unanticipated growth has occurred in the e-commerce sectors. 

The indispensable goal of every business owner is expansion and growth which is restricted to several reasons to implement. One of these obvious reasons is inaccessibility to cash and lack of a reliable growth plan that holds expansion, scale of operation, product portfolio, or quality of service offerings.

However, to cover business expansion expenses, many entrepreneurs opt for financing which isn’t always cost effective or easy. Sometimes, banks are hesitant to lend or provide a personal loan guarantee and even if you find venture capitalists or angel investors, they look for significant returns and a hefty slice of equity.

This creates a challenging situation for entrepreneurs. An alternative financing option to fund the business growth without increasing liabilities is Revenue-Based Financing (RBF). Revenue-based financing is a type of financial capital. In this model, investors inject capital in return for a fixed percentage of ongoing gross revenues.

How to Increase Revenue with RBF?

No Collateral Required –

As revenue-based financing does not require collateral, it removes the major obstacle of credit. In a business loan, you have to provide a tangible asset and in case of default on the loan, the creditor sells the pledged asset to recoup the loss. Contrary, RBF assured you that your assets won’t be sold.

Companies Valuation Increases –

The economic value of a business or a company is determined by valuation. Venture capitalists typically do the valuation with the help of cash flow models, financial statements, and market analysis. However, with RBF you can boost your company’s financial performance. The model works with the companies that are generating sufficient revenues. A business or a company that is aiming to resort to revenue-based financing must have a strong gross revenue to ensure its ability to repay the investment.

Attract VCs

Attracting VCs becomes difficult, but RBF can help in gathering their interest. RBF provides a solid foundation for the business to grow rapidly. VC partners look for a business that has a good growing flow of sales and the ability to reach its points.

Eligibility for RBF –

While RBF is attainable for startups or companies which are at the growth stage, as well as for brand new businesses. A business having less than a year of operating history can apply, qualify and avail RBF.

Through revenue-based financing companies such as VedFin, you can get founder-friendly growth capital which helps you in increasing revenue. Experts from Vedfin helps you not only with financing but with taking financial decision and providing a great eco-system to expand your business and increase revenue.

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