Revenue-Based Financing

Funding Up

To $1 million

Ready to grow your business?

See how much you qualify for:
Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?

Intro To Revenue-Based Financing

The repayment terms are one of the biggest flaws in traditional small-business loans. Even though your company may have ups and downs, you must still make a monthly fixed payment. This is the exact reason why many companies are not eligible for traditional bank loans. It’s impossible to maintain consistent revenue when your industry has busy and slow periods. Revenue-based financing might be the best financing for you if this describes your business.

This unique product is similar to a merchant cash advance, but it’s not just for businesses with high debit and credit card sales volumes. This unique product has a similar structure to a merchant cash advance but is not only for businesses that have high sales of debit and credit card sales. You can also get higher borrowing amounts with longer terms.

What is revenue-based financing?

The monthly income is used to determine the amount of money you receive. You can choose to make daily, weekly or monthly payments instead of monthly fixed payments. Your payments will fluctuate in line with your sales volume, just like a merchant cash advance. While payments for merchant advances are based on debit and credit card sales; payments for revenue-based loans come from total sales.

How Does Revenue-based Financing Work?

The amount you borrow is determined by your total monthly sales. This could allow a borrower access to larger funding amounts than merchant cash advances, which are based only on debit or credit card sales.

The lender will decide which payment schedule is best for you based on your cash flow. This could be daily, weekly or monthly. The lender will deduct a certain percentage of your income based on the frequency you have chosen to repay. The “capture rate” is a percentage that usually falls below 10%. When you make more money on a particular day, week, or month, you will pay more.

Although the amount of your payment may fluctuate based on sales, you are required to pay it back in full within a certain time period.

Recent Reports on Revenue-Based Loans

Online lenders are becoming more popular with small businesses when it comes to revenue-based loans. Morgan Stanley predicts that online lenders and fin-tech companies are expected to reach $47 billion by 2020. This is 16 percent of the total US small and medium business approvals.

According to a Forbes article by small business advisory Next Street, there is a $87 billion funding gap for small businesses. Online lenders are stepping in to help fill the gap.

What are the advantages of revenue-based business loans?

Businesses can use revenue-based financing to make the most of their recurring revenues. You will be able access a significant amount of capital if your revenue has increased dramatically in the last three months. In the past, factors such as credit score and annual revenue had little or no impact on loan size. It is difficult to access larger amounts of money with bad credit or without collateral.

The repayment terms are the most attractive feature of this product. This means you don’t need to worry about paying fixed amounts during a slow week or day. You only pay a percentage of your sales. It is especially suitable for businesses that are seasonal. When you spread your payments out, the total cost of the debt will be lower. You can use the money during slow seasons without having to pay off the entire debt until busy seasons when sales increase.

Contrary to a merchant cash advances, revenue-based loans aren’t only available to companies that have high volumes of debit or credit card sales. You don’t have to worry about which payment method is preferred by your customers as long as you generate a high monthly revenue.

The terms of revenue-based financing are usually longer than those of merchant cash advances. The reason is that while merchant cash advances require a daily payment, revenue-based financing can be paid weekly, monthly or daily.

What are the Disadvantages of Revenue-Based Business Lending?

Businesses that are unable to qualify for alternative financing options or who need access to capital quickly often turn towards revenue-based finance. They may have bad credit and find it difficult to get a term loan or line of credit. Poor credit is a red flag to lenders because it increases the risk that you will not be able to pay back the loan.

To offset the risk, products like merchant cash advances and revenue-based loans are offered at high rates. Revenue-based loans for small businesses tend to be more expensive due to the larger borrowing amounts and longer term. You’ll probably accumulate a lot of interest over the course of your loan.

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How to Apply for Revenue-Based Financing

The entire application process takes only a few moments if you already have all the information needed. In 1-2 days, funds can be deposited into your account. How to start:

Your Revenue Business Loan Gets Set Up – Now What?

It’s not just about getting financing for your business. This is a great opportunity to start building or improving your credit.

If you receive a line of credit or another form of revolving credit, keep your balance below the limit. Keep your credit balance below the limit if you receive a line of credit.

Your credit score will improve if you consistently pay your business financing on time. This will allow you to get better interest rates and terms the next time you need business funding.

What if I am not approved for revenue-based financing?

Remember, this product places a high emphasis on monthly revenue and not annual revenue or gross. This product is based on monthly revenue and not gross margins or annual revenue. It is best to have good sales in the last three months in order to get approval. You may be required to submit statements in some cases to prove that the payback periods you have scheduled performed well during the previous year.

Although revenue-based lending is available to those with bad credit, it’s important to understand the reasons behind the problem. While bad credit may be caused by circumstances outside of your control, other people have so much debt that they can’t afford to take on more. Some lenders may decide that adding more debt to your business would be detrimental.

Blue Tree Financing can guide you through your options, pointing you to the best choices. We may recommend an alternative, more affordable form of business financing in this situation. Business credit cards and personal loans are examples of possible alternatives. These alternatives are easier to qualify than business loans.

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Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?