Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources

These days many small business owners run into trouble when trying to round up enough capital. Bank loan standards are often to high to qualify, angel investors don’t often want to make small loans and venture capitalists want more equity than owners are willing to give up. Among the number of growing alternative sources of funding, business owners can now consider revenue-based financing.

Over a dozen companies across the country are offering these loans that allow entrepreneurs to borrow a smaller amount – usually between $50,000 and $500,000 – with repayment based on how much the company brings in. For example, if a company brings in no revenue one month, they will make no payment and if they bring in lots of cash another month, their payment will be much higher.

This model does not work for all firms. The annual interest rates are typically pretty high – averaging somewhere between 18 percent and 30 percent. And companies without a potential for quick growth will not qualify; it would simply take too long to repay the loan, according to B.J. Lackland, chief executive of Lighter Capital, a Seattle-based revenue-based financing company. “If they pay back in a year and a half, we’ve made an incredible return on investment,” Lackland said in a Businessweek article. “If it takes eight years, it’s not so great. Our risk is that they don’t grow. If they grow, it’s good for them and good for us.”

The risks can be significant. While no collateral is required, the entire business is at stake if the borrower defaults on the loan and most loans are designed to be repaid in three to five years. Yet for those with strong growth potential and positive balance sheets, the flexibility of the revenue-based payments can be a big benefit, says National Federation of Independent Business’ Senior Research Fellow William Dennis in a Fox Business piece . “It’s matched to how well you are doing, where more traditional models are not necessarily tied that way.”


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources