Revenue-Based Financing versus Traditional SBA Loans

Revenue-Based Financing versus Traditional SBA Loans

SBA-approved lenders and conventional banks consider your revenue in the application process, in order to find out the loan amount which you can borrow. SBA guaranteed loans are available to startups as well.

An SBA business loan is set up in a way to be paid back with fixed monthly payments, which are expected to be amortized over the loan term. When it comes to revenue-based business loans, your company’s revenue is reevaluated once per month to find out your loan payment for that particular month, which means that your payment will vary from one month to the next based on your business revenue.

To get funds through revenue-based financing, you will not have to offer up anything as collateral. However, for an SBA loan, collateral is needed, although how much of it is required to get the loan depends on that lender’s requirements, or what kind of business loan you are applying for. It is hard to place an exact number with regards to SBA loan collateral.

Another aspect where both forms of financing differ is the time for funding. While the former takes around 4 weeks, to get SBA loan funds you would have to wait anywhere between 30 and 90 days.

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