Revenue Based Advance
If you need money to buy inventory to increase sales and have been denied bank financing, Revenue Based Advance is one solution to get the capital required and leverage your cashflow to generate more income.
How Does it Work?
- Revenue based advance is a business loan based on business income. A lender will give you a loan with interest, and the repayment relies on a percentage of monthly turnover.
- The cash advance is a funding solution for a business which generates income, has a positive cash flow, but falls short of traditional bank loan criteria with the lack of collateral or a poor credit rating.
- The lender can assist a business with excellent revenue track record and funding is often supplied in a few weeks without collateral and a whole lot of hoop jumping.
- The loan is based on future revenue predictions, shown in a proper cash flow document.
- Payment amounts fluctuate according to sales: The repayments are not fixed to a predetermined monthly amount. Much like a Merchant Cash Advance, the Revenue Based Advance works on a percentage of sales. It means that a business will not have to pay more than they earn.
- The percentage amount is negotiable; often around 10% or less of gross income.
- Equity is not touched, and there is no need for a company valuation. It means that the paperwork is kept to a minimum, creating a level of trust between business and lender.
- However, there should always be a way out strategy if things don’t go according to financial forecast.
- Personal Assets do not form collateral and the time taken to obtain the cash injection from the lender is often under a month.
Pros and Cons of Revenue Advance
- Flexible terms, repay the funding based on future sales
- No need to give away equity in your business
- You know total amount to be repaid from the outset: No fees, penalties or hidden charges
- You keep 100% of your cash income
- In slow times, you pay back less, and in good times you pay back more
- Sometimes the repayment can take longer than anticipated leading to a relatively high loan cost