Financial growth is vital for start-ups to sustain their proficiency and profitability. Without adequate financial growth, the true potential of a start-up venture will not be realised; leading to stagnation of its capability to cater to customer demands on a larger scale. To obtain efficiency in terms of financial health and foster capital growth, businesses can avail the revenue-based financing services extended by KredX. Such a financing service not only provides quick access to funds but also allows firms to boost their growth prospect successfully.
Revenue-based financing or royalty-based financing is a potential method of raising capital from a firm’s investors to meet business-oriented requirements. In exchange for the investment amount, individuals are entitled to receive a portion of the firm’s projected earnings, based on previous sales figures.
Investors continue to receive such pay-outs until they obtain a predetermined amount. Generally, the said predetermined amount is a multiple of their invested sum and tends to range between at least 3 to 5 times the principal investment.
Typically, such a funding option comes with variable repayment tenure as the same depends on the percentage of revenue that a firm generates in a month or so. The royalty-based financing serves as a potent alternative to other conventional equity-based funding options.
Also, the fact that revenue-based funding does not require businesses to give up a portion of their ownership, appeals more to the start-up owners. It must be noted that revenue-based funding is a blend of debt and equity financing. However, there are no fixed pay-outs, and no interest is generated on the unpaid balance.
Enterprises can avail revenue-based financing services from KredX easily and access immediate funds by pledging a share of their anticipated monthly or annual revenue. Nonetheless, to maximise the utility of this financing option, one must understand how it works.
These pointers below enumerate the process of how revenue-based funding works –
Typically, when a company generates surplus revenue, the borrowed sum is paid off quicker. However, during the seasonal lows of the business cycle, when the income generated is marginal, it may take a little longer to pay off the debt.
Revenue-based financing is essentially a growth capital, availed to meet cash requirements related to –
Start-ups often find it difficult to avail a business loan sanctioned from a lending institution, due to lack of credit history or low credit score. However, KredX follows relatively less stringent requirements to sanction funds to the start-up owners.
Other than that, here’s how start-ups benefit from revenue-based funding –
Collectively, these features come in handy for start-ups and allow them to witness organic growth and sustainable profitability in their venture. However, start-ups should also factor in various shortcomings such ase access to limited cash and associated fees, before availing this facility. Doing so, they will be able to come up with necessary strategies that will help to minimise the impact of the drawbacks.
Nonetheless, entrepreneurs who avail revenue-based financing services offered by KredX receive easy terms of repayment and quality integrated cash flow solutions.