What is Revenue-Based Financing? What is the comparison to equity?

Revenue-Based Financing (RBF), also known as revenue capital or royalty based financing.  A good example of company using Revenue-Based Financing is a company that has a contract or growth opportunity and not interested in giving up equity to an Angel Investor or Venture Capitalist.  The underwriting time frame is a lot quicker than a bank loan or an equity transaction.

I always equate equity to getting married or courting someone to be your boyfriend or girlfriend.  It takes typically takes several months before someone is willing to take their relationship to that level.  This one reason I like Revenue-Based Financing.

Sample examples are an IT company with an opportunity to grow exponentially and does not what to worry about an liquidity event for equity.  A company that has a contract and lacks the past performance/revenues that a bank is looking for.

What are the Cons?  I would say it depends on the company.  What are you looking for financing to do for you?

For more information see Revenue-Based Financing link.

I would always seek advise of a Business Financial Consultant or your financial adviser.

Written by Dominick Wallace, Managing Director of Wallace Capital Funding, LLC