What Are the Key Benefits of Revenue-Based Financing?
Basically, these are offered to businesses in exchange for a share of future revenues. There are several benefits of revenue-based funding and mainly based on four parameters, namely, flexibility and lower risk vs. ownership and control.
Credit-based financing is not dilutive like most debts. Any further obligations would be discharged once the whole amount is fully repaid. However, the amount to be paid to the lender would already be fixed in most of the lending institutions. From the point of borrowing, these kinds of financing would maintain both ownership and control.
Furthermore, the performance of the business would be directly influencing your monthly repayments. Your financing would be continuing at a variable cost, by moving up and down with your revenues. Your repayments would be affected if your sales are temporarily slowing down. Nevertheless, revenue-based financing would a perfect choice for seasonal businesses like those of hotels. Similar will be the case if the sale of the consumer has faster growth, where the borrower would end up repaying the revenue advance more quickly because monthly payments are higher. These features prove revenue-based financing is both flexible and low-risk.