Revenue-based Financing Explained: What is RBF?
As funding options for growth-stage companies continue to evolve, one emerging trend in the world of finance is Revenue-Based Financing (RBF), a form of alternative financing that is becoming increasingly popular among growth-stage companies.
Revenue-based financing (RBF) is a type of funding method in which investors provide capital to a business in exchange for a percentage of the company’s ongoing revenues. This form of financing is an alternative to traditional equity or debt financing, as it allows the business owner to maintain ownership and control over their company while providing investors with a steady income stream based on the company’s performance.
In RBF, the repayment of the investment is directly tied to the company’s revenue growth. As the company generates more revenue, the investor receives a higher return. Conversely, if the company’s revenue decreases, the investor’s returns will also decrease. The repayment process typically continues until the investor receives a predetermined multiple of their initial investment.
Some key features of revenue-based financing include:
– Non-dilutive capital: Unlike equity financing, RBF does not require business owners to give up ownership or control of their company.
– Flexible repayment terms: The repayment amounts are tied to the company’s revenues, which means that the business owner pays more when the company is doing well and less when it is not.
– Alignment of interests: Both the investor and the business owner benefit from the company’s growth, creating a strong incentive for both parties to work together to achieve success.
– Speed and simplicity: RBF can often be arranged more quickly and with less complexity than traditional equity or debt financing.
Revenue-based financing is well-suited for companies with strong revenue growth, predictable cash flows, and high gross margins. It is particularly popular among software-as-a-service (SaaS) companies, e-commerce businesses, and other subscription-based models. However, it may not be ideal for early-stage startups with no revenues or for businesses with high capital expenditures or low margins.
About Decathlon Capital Partners
Decathlon Capital Partners provides growth capital for companies seeking alternatives to traditional equity investment. Through the use of highly customized revenue-based financing solutions, Decathlon provides long-term growth capital without the dilution, loss of control and operational overhead that often comes with equity-based funding. With offices in Palo Alto and Park City, Decathlon is the largest revenue-based funding investor in the U.S. and is active across a wide range of sectors. Learn more at www.decathloncapital.com.
If you are looking for capital to accelerate your growth, we would love to talk.
DECATHLON INVESTMENT CRITERIA
Operating history of at least two years
Annual revenues between $4 million and $100 million
Annual growth rate of 10% or more
Attractive gross margins
Experienced management team
North America-based operations
Near-term visibility to cashflow-positive status