What is Revenue Based Financing?
Revenue-based financing (RBF) is funding in which a company agrees to share a percentage of future revenue in exchange for up-front investment. Payments are tied to monthly revenue, and fluctuate up and down depending on revenue growth. The investment matures over time up to a pre-agreed return multiple.
Benefits in relation to venture:
With venture funding, you’re typically giving up ownership typically 20–30% of your company, and governance control with a board seat.
- Retain ownership and control
- Pay based on monthly revenue
- Faster financing
RBF right for you?
If you know you can spend $1 in customer acquisition to get $2 in new annual recurring revenue, RBF may be right for you.
Revenue-based financing offers a more sustainable alternative while allowing founders to retain ownership in their businesses.
Cons: It’s difficult to model the true cost of capital on an RBF.
If you grew faster, you’d pay it off faster as its tied to your monthly revenue. This can result in an increase in your annualized rate of interest.
- Lighter Capital
- Liquidity Capital
- Alternative Capital
- Bigfoot Capital
- Earnest Capital
- Flexible Capital Fund