Business Revenue Financing, have you heard of it? Its a great way for businesses to access money through revenue-based financing. Its also sometimes referred to as revenue participation or revenue sharing funding. Revenue financing is a loan to a company which is paid back through a royalty on the revenues. Typically this royalty is in the 2 to 5% range. With revenue based capital, instead of selling ownership in your company you sell rights to a percentage of your companys revenue for some period of time. Funding is commonly available up to 12% of a companys annual revenue. You receive money monthly, sometimes equal to 10% of monthly revenues. To qualify a company must have current revenue. When you borrow money from a bank, you commit to repayment and you commit to a specific rate of repayment. One of the benefits of revenue funding is that it provides a variable payment. If revenue goes down, your payment also goes down equivalent. This is extremely helpful in seasonal industries. Another difference compared to a bank: lenders want a personal guarantee and collateral. If you default you may lose that collateral. Revenue based financing typically has no collateral requirement. There are also no personal guarantee requirements for the founder unlike bank loans. This funding can be used for many purposes including growth capital. And there are no restrictive covenants like bank loans. Revenue Financing is one of many funding programs available to you.
Posted on: Mon, 10 Mar 2014 05:33:49 +0000
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