Revenue-Based Financing FAQ

Do you only fund SaaS companies?

No, while SaaS business models align very well with Revenue-Based Financing we have used RBF to fund non-SaaS businesses with strong gross margins. The revenue requirement for investment consideration is the same for non-SaaS businesses.

How flexible is the repayment of the loan?

One of the key attributes to RBF is its flexibility of repayment. A predetermined percentage of revenue (typically 3-8%) is used. Due to the irregularity of cash flows commonly associated with an early-stage business, RBF financing provides a more flexible option than a traditional loan structure.

Is RBF always the best source of capital for early stage start-ups?

When comparing RBF to an equity offering, RBF is almost always going to be the most cost effective means for an early stage SaaS start-up to raise capital. However, there may be a situation where a strategic equity investor brings a great deal of value-add to your business. In those situations the higher cost of capital may justify the cost.

There are situations where the use of both RBF and equity is advisable. For example, there is a strategic investor that is interested in an equity position but is not capable of fulfilling your funding needs. In this example, RBF could be used to bridge the gap and reduce your overall total cost of capital.

With so many positive attributes, why is RBF still uncommon?

RBF has been around for decades in industries such as natural resource exploration, entertainment, and pharmaceuticals. However, it’s just recently become a form of investing in early-stage companies. The trend started on the East Coast in the 1990s, catching on throughout the country over the last 20 years.

The current economics behind SaaS startup creation enable RBF to be a viable and attractive option. Founding teams are bootstrapping their way to modest revenues, achieve customer validation and use RBF funding to accelerate growth.

How does RBF work with other venture capital?

RBF is an excellent precursor to future VC investment. Many companies find RBF the right fit to grow their business to a size that attracts a VC firm to invest in their company at a later stage. Several of our portfolio companies have gone on to raise VC funding.

How does RBF compare to receivables financing?

Receivables financing, also known as factoring, is designed to speed up cash flow from sales that have already occurred. Whereas RBF is designed to fuel future growth initiatives. RBF also offers much more flexibility than receivables financing.

How long does it take to obtain funding?

We expect to fund qualified companies within 30 days of our initial meeting.

What is the process to obtain funding?

These are the steps from start to finish.

Engage & Understand
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  • Initial conversations to get an overview of the business

Agree on Terms
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  • Payoff amount or “cap”
  • Prepayment discounts
  • Monthly payment percentage
  • Term Sheet Signed

Due Diligence
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  • Confirm our initial understanding of the business
  • Gather detailed materials
  • Learn more about the team

Receive The Loan
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  • We move quickly, we expect to fund within 30 days of initial engagement

Remit Payment & Reporting
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  • Submit monthly payment, which is a percentage of revenue
  • Submit updated financial reporting with your payment

Assistance
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  • We’re here to help, leverage the experience of our team
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Pay Off Loan
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  • Payoff is complete once the “cap” is reached
  • Early payoff results in a lower cost of capital
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