Why Choose a Revenue-based Business Loan?

Quick action lets companies make the most of opportunities that come along, but sometimes funding your needs can be tricky. Whether you want to expand your business or adjust to a sudden change in the market, revenue-based business loans can be a great way to secure extra capital.

What Are Revenue-based Loans?

Revenue-based business loans are an alternative type of loan that is growing in popularity. They are well suited to small- and mid-sized companies that need a loan on short notice.

As the name implies, revenue-based loans are tied to the business's gross revenue. The loan is repaid at a rate that scales with the borrower's gross revenue rather than having a fixed repayment scheme.

Revenue-based loans are regarded as a hybrid of the debt and equity lending models since they combine many of the best features of both. They let you preserve your control over your business without exposing it to the risks that come with other loan types.

What Advantages Do Revenue-based Loans Offer?

The revenue-based business loans offered by Texas Funding Solutions have several advantages over traditional loans. While some of the benefits were mentioned above, here are a few that merit a closer look:

Fast Approval

Revenue-based loans are an excellent way to secure capital quickly because they have a fast turnaround.

Traditional business loans can take a lot of time to get approval. Credit checks, appraising collateral, and other due diligence measures take time. It's not uncommon for the approval process to take as long as 90 days.

Texas Funding Solutions can vet and approve a revenue-based loan in five days. This is helpful if your company needs to cover an emergency expense or seize an unexpected opportunity.

Maintained Control

Revenue-based loans are so popular because they are a great alternative to venture capital.

Securing funding from venture capitalists requires businesses to surrender some control over their business. While there are ways to manage this loss of control, venture capitalists push for rapid growth. 

Revenue-based loans give borrowers access to the same sort of fast money they could get from VC without surrendering control of their operations. Tying repayment to the company's gross revenue allows companies to grow with demand for their services. The repayment plan is also flexible, which allows you to manage your needs with less pressure.

No Collateral

One of the problems with debt-based financing is the need to secure the loan with collateral. Many businesses may not have enough collateral available to secure the loan. 

In other cases, the only collateral available may be assets or equipment that the business needs to operate. Risking assets like these to secure a loan comes with considerable risk.

Revenue-based loans do not need to be secured with collateral. This is especially advantageous to new companies or SaaS providers with relatively few physical assets. It allows companies to get the funding they need without risking their ability to do business.

No Monthly or Annual Interest

Revenue-based loans lack conventional interest rates. The repayment is determined up-front based on the amount borrowed. The borrower then pays a percentage of their monthly revenue without worrying about getting buried in compounding interest. These payments can be set up for automatic withdrawal to help alleviate the burden of paying them.

No Credit Checks

Bankruptcy can damage the credit of both the company and its owners. This can make it difficult to recover. Lenders will often check your credit as well as your business's credit when vetting a loan. If you or your company has bad credit, your business may be unable to secure the funding it needs.

It takes time to establish a good credit score. Even without a history of bankruptcy, new businesses and young entrepreneurs may lack the credit score needed to secure a loan.

Credit checks are unnecessary to qualify for a revenue-based loan from Texas Funding Solutions. This makes revenue-based loans an excellent option for businesses that are still building their credit or for those who have had financial troubles in the past.

Short-term Borrowing

Revenue-based loans are a great way to generate quick cash without a long-term commitment. These loans are calculated for 2–5 year periods. This makes them ideal for funding a measured expansion of your business. You get the capital you need to seize new opportunities without burdening your operation in the long term.

Learn More About Revenue-based Business Loans

Revenue-based business loans are one of the best new options available to businesses. Their advantages make them a great way to energize your business without taking on the risks involved with other loan types. Texas Funding Solutions offers a variety of business financing options. Contact us for more information on revenue-based loans, or explore our other borrower-friendly options. We want to help you finance your business goals in a way that's best for you.