April 1, 2024

Revenue-Based Financing (RBF) as an Alternative Funding Option


Are you seeking funding for your e-commerce company? Traditional financing avenues may not always understand the unique dynamics of online businesses, leaving you feeling stuck. However, There's always another solution you can consider: Revenue-Based Financing (RBF).

What is Revenue-Based Financing?

Have you heard of Revenue-Based Financing (RBF)? The name might give it away but let's expand further and break it down. RBF is a funding model where investors provide capital to businesses for a portion of their future revenue until the initial investment is repaid. No rigid repayment schedules tying you down as repayment is directly linked to your actual revenue. For example, during slow months when cash flow might dip, your repayment amount adjusts accordingly.

Full Ownership and Control

Unlike VC and private equity investments, RBF doesn't require giving up ownership or control. Instead, The business agrees to pay back a portion of its future revenue to the investor until it has returned the money they invested. The idea of giving up ownership of your business can be daunting. But with RBF, there's no need to worry about diluting equity. Instead, you're simply sharing a slice of your future revenue, which is a far more flexible arrangement.

The Power of Flexibility

One of the best things about Revenue-Based Financing is how flexible it is. Unlike conventional loans where you have to stick to set repayment plans or equity investments where you must meet investor demands, RBF lets you pay back money based on what your business actually earns. Additionally, conventional loans often have high interest rates and take a long time to pay off, sometimes years. But with RBF, your business is able to pay back smaller amounts over a shorter time frame. This works well for online businesses that need working capital to buy inventory a few times a year or to spend more on marketing when it's needed most, with the ability to top-up for additional funding.

Built for Growth-Stage Businesses

RBF isn't a one-size-fits-all solution, but it's particularly suited for online businesses looking to expedite their growth. Whether you're boosting digital marketing efforts, investing in inventory, or expanding operations, RBF offers the working capital your business needs, minus the constraints of traditional funding options with long payback periods and little to no understanding of how online businesses work and operate.

Getting Started with Revenue-Based Financing

If you're considering Revenue-Based Financing for your online business, working with erad makes the process simple. erad integrates directly with the platforms you use for your online business, such as sales platforms like Shopify and Salla, marketing platforms like Snap and Meta, as well as accounting and banking platforms. This integration speeds up the application process. Lenders can then evaluate your revenue quickly and offer funding options tailored to your business needs, in as little as 48 hours.