When you are ready to grow your company to the next level, securing capital funding is a primary concern. Depending on your business revenue and model, there are typically various options for obtaining the capital you need. These options include bank loans with interest rates, equity financing, and debt financing.
If you need a significant capital infusion and your company has consistent monthly revenue streams, revenue-based financing should be your first choice for raising capital that has our personal guarantee.
How Does Revenue-Based Financing Work?
Revenue-based financing, also referred to as royalty-based financing, is similar to a fixed loan but has a unique finance model. Instead of having variable payments, revenue-based financing allows your business to make consistent monthly payments that never change, even if your revenue increases.
The amount of capital you can receive through RBF varies from lender to lender. Financing typically depends on your company’s needs and the qualifications you meet.
Who Qualifies for Revenue-Based Financing?
Revenue-based financing is a perfect funding option for SaaS businesses and other companies whose primary income is subscription-based. An expensive monthly recurring revenue (MRR) and high gross margins combine to permit a business for a royalty-based loan.
Those qualifications almost exclusively apply to young tech companies, including telecom, tech services (TS), platform as a service (PaaS), and Software as a Service (SaaS) companies. Each of these business types is almost exclusively dependent on monthly recurring revenue from subscriptions.
How is Revenue-Based Financing Used?
Companies who obtain revenue-based funding use it as a form of growth capital. Once the term sheets are signed, there are few stipulations for how you may use the money once you get it.
The limited overhead means that you could spend the money on a new marketing and sales campaign, develop a new product, or hire more staff. The way you use the capital depends on your expertise and company assessment.
How Does It Compare to Other Types of Loans?
Compared to alternative lines of credit, revenue-based funds have significant upsides for companies with consistent MRR and profit margins.
Venture capital is the modern way for tech companies to obtain capital in 2021. When venture capitalists believe in a business’s potential to scale quickly, they will invest immense amounts of money. However, this comes at a high cost of capital and risk because investors usually require you to give up some board seat control and equity.
Alternatively, revenue-based funds allow you to obtain significant capital without the hassle of a bank loan amount or sacrificing company leadership, as with venture capital. For some companies, revenue-based financing may not fit their business models or capital needs in the start-up phase.
We Grow Your Recurring Revanue without Giving Up Equity
For tech companies that are already generating revenue with strong MRR and profit margins, revenue-based funds are easily the best type of financing to grow business to the next level. Growth capital options that provide your company’s financial success, in the long run, are far and few between. Popular avenues such as venture capital steal equity and board seats that SaaS companies cannot afford to lose.
At RevTek Capital, we understand business growth acceleration and how to benefit your company from beginning to end. Our company is proud to offer the lowest cost and quickest solution for early-stage emerging growth companies. If you are interested in learning more about Revenue-Based Financing, call our professionals at 480.332.0399.
More flexible than the bank
We lend more to early-stage growth companies
Interest rates can be lower for bank loans than for revenue-based financing, but beyond small lines of credit, banks rarely lend enough for early-stage growth.
Bank loans contain complex covenants that can be difficult to navigate.
Monthly payments rise and fall with the ebb and flow of your revenue
Your monthly payments
Revenue loan rate
Monthly net cash receipts
Payments adjust to what your business can afford.
The payment rate is always below 10% to minimize the impact on your cash flow.
How fast you repay your loan depends on how fast your business grows
Our loans are normally repaid over 3–5 years, but if your revenue grows faster than planned, you can pay off the loan sooner.
Banks, on the other hand, can make it very difficult or expensive to terminate a loan early.
Far cheaper than equity
Our revenue-based financing uses a simple, transparent pricing model so you know your total commitment from day one
Revenue-based financing has two costs:
A repayment cap,
Minimal legal expenses (usually around $3,500),
The repayment cap is calculated as follows:
Cost of funds
The cap is usually 1.3–1.8x the amount borrowed, paid back over the length of the loan (usually 3–5 years).
Venture capital is not free—in fact it is vastly more expensive in the long run.
The equivalent “payment cap” for venture capital can be 10–20x the amount they invest in you—or more.
And initial legal fees and expenses can easily reach $30,000.
Funded More than 27 Growing Technology Entrepreneurs
As an intermediary, I have had the opportunity of working with the Principals regarding the financing needs of operating companies which I represent. They are very proficient at, being able to "Peel the Onion Back" in analyzing a particular financing need to come up with solutions that would meet the needs of my clients seeking financing. With it being a flat organization, you are always talking directly with the decision makers who are very responsive in their communication of: How to get to a deal or we do not see this fitting into our lending model.
Thunderbird Corporate Finance, LLC
RevTek Capital has evolved into more than a financial partner for our company. While their financial acumen is evident early on, the long term benefit RevTek Capital offers is the ability to dig into the operations side of your business and offer a fresh perspective or a new connection that can further your business. If you're getting started and want a big value add to your financing, RevTek Capital is an excellent choice.
WISPer Ventures / REVTEK Capital went to bat for us early on and has proven to be a great financial partner throughout our record historical growth. They went the extra mile to really understand our business early on, when other lenders simply wouldn’t.
In addition, they have proven to be much more than a direct financing source by helping us raise additional capital from outside sources to further accelerate our growth.
If you are an early stage company seeking growth capital with an objective to minimize dilution, WISPer/REVTEK is the perfect choice.
If you are looking to expand, restructure, or explore alternative options with your SaaS business, RevTek Capital can help you reach your goals.