A Solution to Dilution : Revenue Based Financing

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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.

RBF Providers:


Disclosure:

This communication is on behalf of Birch Global Inc., d/b/a Dinote, Inc. (“Dinote”). This communication is not to be construed as legal, financial, accounting or tax advice and is for informational purposes only. Dinote does not assume any liability for reliance on the information provided herein.

This post may contain links to articles or other information that may be contained on third-party websites. The inclusion of any hyperlink is not and does not imply any endorsement, approval, investigation, or verification by Dinote, and Dinote does not endorse or accept responsibility for the content, or the use, of such third-party websites. Dinote assumes no liability for any inaccuracies, errors or omissions in or from any data or other information provided on such third-party websites.

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