This post was originally published on On Deck
Entrepreneurs have many options to consider when seeking funds to support growth. One of these options is revenue-based financing (RBF). This approach to funding offers small business owners a flexible form of financing without the traditional constraints of debt financing or venture capital.
But what exactly is revenue-based financing, and is it the right fit for your business? Let’s explore the ins and outs of this financing option so you can make an informed decision.
What is revenue-based financing?
Revenue-based financing is a financing model where lenders provide capital to businesses in exchange for a percentage of future revenue. Revenue-based financing is sometimes referred to as royalty-based financing.
Unlike traditional loans, there is no fixed interest rate or repayment schedule. Instead, repayments are tied to the monthly revenue generated by the business, making it a more flexible solution for startups or companies with fluctuating cash flow.
For small business owners, especially those in the early stages, RBF can be an appealing option. It offers growth capital without giving up equity or facing the risk of hefty monthly payments. The business repays the lender through a share of its future gross revenue, which means the repayment amount decreases during slow months,
— Read the rest of this post, which was originally published on On Deck.
