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Revenue-Based Funding

I am delighted to see that revenue-based funding is becoming a growing competitor for equity and bank–not least because I was a beneficiary of such borrowing back in 1982.

The advantage to entrepreneurs is that the loan is based on your forecast revenues and repayments are in the form of royalties on them. So some people call them royalty-based loans.

Thanks to Thomas Thurston of Growth Science International for the illustration to the left.

The benefit for the enterprise is that you pay when you can afford to. If revenues are below forecast, then you are not penalized by digging into your cash when you can least afford it. The benefit for the lender is that if you do better than forecast, then you pay more.

So your repayments are variable and linked to revenue. You may not like paying more, but you only have to when you can afford it. Read more on Revenue-Based Funding and compare it with other new forms of funding such as Crowdsourcing.

PLEASE NOTE: There is tons of useful stuff on Startup Owl, a site that’s been going for a dozen years. So keep browsing, but know that the founder, Will, now devotes most of his time and energy to his new website that you should definitely visit:

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