There are many people who are not aware what Revenue Based Lending is and if it is a good thing for them to get such lending. It is important to note that not all types of loans are proper for your business. While lending the money, lenders usually match funding to the cause for borrowing so that the funding is utilised in a wise manner for the purpose that it is intended for so that the borrower can achieve the goal that he or she intends. Revenue Based Lending is a type of investment or financial structure that is done for financing subscription revenue for the future in exchange for a certain percentage of some ongoing gross revenues up to the point where the investment together with a multiple is paid back to the investor.
That type of financing is most suitable for companies that are growing fast and which generate recurring revenues that are high every month which may include Software as a Service companies. Such companies may not be not be in a position to qualify for traditional bank loans because they may not have assets that they can give out as collaterals for the loan. Revenue Based Lending is the best for early-stage companies which have high revenue growth that may need additional funding for financing their growth. Payment is made in monthly basis based on a percentage share of the client’s gross revenue for each month which is the same as royalty payments. In case there is a drop in revenues, the same thing happens to payments and vice versa. The funding usually matures when the total repayment period, which is usually pre-determined, is reached. That period is usually between six and sixty months but mostly depends on the client’s needs.
There are some Revenue Based Lenders who offer some modified financing which they have modified to between three and twelve months and which have fixed monthly payments and fixed maturity periods. Some of the requirements that a potential client should have may include high gross margin, monthly recurring revenue, low customer rate, cost of getting a customer, among others. It is normal for Revenue Based Lenders not to ask for collateral or some personal guarantees while lending some finances. Most of them rely on how the borrowers are performing financially. There are some instances however which may require personal guarantees and mostly if the company that is borrowing is not financially stable or if it is a start-up. Find out more details at this link: https://www.dealstruck.com/ecommerce-retail/
To get additional info, visit – https://en.wikipedia.org/wiki/Loan#Loan_payment