4 Things to Consider Before Opting for Revenue Based Financing

Although revenue-based financing has many benefits and in-built flexibility, founders should be assessing its suitability once they considered all the aspects of the product and the lender.

Like most VC backed business models it has some hidden aspects which could shape a founders decision-making process, which in our ecosystem are not widely discussed, mostly due to sheer inconvenience and complexity.

Early Stage Friendly?

Revenue Based Lenders always check for revenue growth before underwriting, with every single provider bringing a unique AI or technique or data approach to support their market thesis.

It is important to understand how all lenders will assess companies, what data you will need to provide them, and whether that data will be captured long after you have stopped using their solution.

Most will be focusing primarily on revenue growth derived from predictable performance on marketing channels, LTV: CAC. It is about funding the future potential based on the commercial data available at a point in time.

Most revenue-based lenders will require at least a year of trading and a few good months of data disqualifying most newly established businesses with early traction, the point at which they have the lowest valuation when they fundraise.

Benefits and Perks