Revenue Based Funding (RBF) originated in the oil, gas and mineral industries as a source of debt financing. From there, it expanded into the life sciences, movie, marine mining and energy industries. Most recently crowdfunding websites have begun offering this type of funding.
We have identified eighteen other names. The most commonly used alternatives are revenue loan, revenue-based funding, royalty financing, and royalty-based financing.
Revenue-based financing ("RBF") is a loan in which repayments are based on a percentage of the borrower's monthly revenue rather than a fixed amount. The payments fluctuate with the borrower's financial performance, going up when revenue is strong and down when it is lower.
How does revenue-based financing work?
RBF can be structured in many different ways. The most common structure is a term loan. Typically, the full amount is not advanced up front. The drawdown can occur over multiple years so that interest expense is not incurred until the funds are needed. Payments (which include principal and interest) are based on a fixed percentage of revenue or cash receipts from the prior month or quarter.
The structure is flexible; generally, payments are made until one of the following milestones occurs:
After the milestone is reached, the loan obligation is retired and no further payments are due.
Non-bank lenders and investment funds.
What Is The Time frame for Funding?
Typically less than 45 days.
What Industries Qualify For RBF?
Oil and Gas
Food and Beverage
Truckstop or Gas Station
Fuel or Food Distribution
Are there Upfront Fees?
Yes, there are typically upfront fees specifically being legal fees, accounting fees, origination, and broker fees.
How Do I Know I Qualify?
To qualify for (RBF) a business should be generating a minimum of $250,000 a month. The model should be a subscription based or similar recurring revenue model.
What Does SpotOn Financial Do?
SpotOn Financial has direct relationships with Venture Capital and Alternative Finance companies. These companies do not pay SpotOn Financial a fee. This model allows SpotOn Financial to be completely independent and only recommend or select the lender if the lender is the right fit for our client.
Are my fees to SpotOn Financial Refundable?
Yes, select fees paid to SpotOn Financial are refundable but are specific to the engagement agreement you sign.
To determine if your business will qualify for revenue based funding. We think you should consider the following before you apply for funding.
1. Audited Financials- If your business cannot provide audited financials to show your revenue stream. We strongly suggest before you seek investors or lenders. Spend the time and hire a CPA or Firm that can prepare fully audited financials.
2. Pre-Revenue- If you are pre-revenue company. Then we suggest you have a strong business plan and a clear revenue strategy. Afterall, you are asking for revenue based funding. Show the lender and your investors the money.
3. Existing Business- To bring a revenue based lender onboard you need to have a clear stream of revenue. Most lenders prefer a subscription based model or a strong recurring revenue model.
4. Revenue-Sales Forecast- More revenue based funding deals "blow up" because the company or revenue simply cannot show a way to either consistently maintain revenue or with funding increase sales. Make sure the sales and marketing strategy can support growth.
There are very few financial brokers in Colorado and frankly in the United States that have the depth of understanding with Revenue Based Funding. Schedule your appointment to speak with us to determine if this is a funding option for your company.