There are lots of people who are still not knowledgeable about what RBF or Revenue Based Finance is. Some people might say “money is just a thing, regardless of what its label is”. No, this statement is not correct. Not all kinds of loans are suitable for your company. Just similar on how a physician would prescribe drugs for a certain kind of disease, the lender would match the funding in order to borrow the cause. The main reason is to make sure that the funding would be properly used for the real purpose to permit the borrower in getting his or her intentions.
The RBF is a kind of financing structure is aims in future subscription revenue in exchange for the percentage of the ongoing gross income until the investment, plus the multiple would be repaid straight to the investor. This kind of financing is suitable for all growing businesses that make the highest monthly incomes. These businesses might not qualify for the conventional bank financing because they have insufficient assets in order to collateralize the loan. This kind of loan is also best for the new businesses that have high growth in revenue aside from their financial growth.
The monthly payment of the loan would be based on their client’s monthly income, the same thing with the royalty payment. If the revenue of their client would drop, the payment would also drop. Funding maturity is related to the time whenever a predefined repayment capacity would be reached, usually around 5 years, depending on the needs of the clients. Several RBF investors provide the modified short-term financing, which is around 1 year, with fixed monthly payment and maturity. The qualifying requirements of the potential client is the generation of their MRR or monthly recurring revenue, cost of getting a customer, marginal gross, and many more. Learn more here.
Typically, the RBF lenders or investors would not you for any personal guarantees or collateral. They depend on the monetary performance of their clients, instead. But, there are times when the personal guarantees might be needed, most especially if their client is having a weak financial start-up. Several RBF investors might need to register to the 1st lien of their clients’ assets such as the trademarks, domain names, and patents. This is generally done in order to make sure that the debt would be categorized as the senior debt in cases of foreclosures. See more from this page.
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