Revenue-based financing ("RBC") is not a traditional loan or a private investment. Bank Loans often require personal guarantees, collateral, and conventional credit checks. Private investors often need a percentage of ownership (equity) in your business for an unlimited time and have managerial control of your business. RBC is a way to raise capital for your business from investors who receive a percentage of ongoing gross revenues in exchange for the money invested.
RBC is different than equity financing. The investor does not have direct ownership or managerial control in the business. RBC is often considered a hybrid between debt financing (selling debt instruments to investors) and equity financing (raising capital through the sale of shares). Payments to investors are directly proportional to how well your company is doing. This means payments may vary based on how well your business is doing during that particular period.
The benefits of a RBC are its flexibility and low risk. RBC is non-dilutive; you don't lose stake in your business, so you maintain control over its future. Like a loan, a fixed amount will be repaid, and once repaid, you are relieved of any further payments and obligations.
You may qualify if your business has the following:
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