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Revenue Based Business Loans & Financing – Q & A

Business owner holding a chart of their revenues going up

When you’re a small business owner, it’s not always easy to get a loan. You might not have the track record or collateral that bigger businesses do. But don’t give up yet! There are still ways to get the money you need to grow your business. Here are some questions to make getting a revenue-based small business loan more manageable. 

What is a revenue loan?

Revenue-based business loans allow a company to get an unsecured, private financing deal using their monthly revenues as a basis to qualify. 

How does revenue-based financing work?

With revenue-based financing, lenders purchase a certain percentage of a company’s future gross revenues in exchange for business financing today. A factor rate determines the difference between the funding amount and what is paid back. 

Is revenue-based financing good?

Revenue-based financing is a new way of doing business, and it’s quickly becoming one of the most popular methods around. This type of business financing will allow you to retain complete control over your company while still having cash when needed to fulfill obligations on time. 

How much revenue do you need for a business loan?

The answer can vary depending on who you ask. Some lenders require a specific amount, while others say it depends entirely on your business and its needs. The amount of revenue your business has directly correlates to how much financing companies will lend. The minimum required is generally $75,000+ in revenue annually. If your company doesn’t make enough money, consider looking into short-term business loans or equipment financing as alternatives!

Is revenue-based financing debt or equity?

Revenue-based financing is a type of debt that many businesses use to expand their operations or working capital. 

What is recurring revenue financing?

Recurring revenue loans are financing available to companies with predictable, ongoing income. You’ll need to show the bank how much money you expect from customers, as well as revenue for the past months, for them to approve your loan. An insurance agency is an excellent example of a business with a predictable amount of recurring revenue. 

What are the types of business loans?

The main types of business loans are term loans, SBA loans, lines of credit, equipment financing, invoice financing, merchant cash advances, and revenue-based business loans. 

Are revenue-based business loans secured or unsecured?

A secured business loan is backed up by collateral like property, equipment, etc. An unsecured business loan is based on creditworthiness alone without any protection if you don’t repay the debt. Revenue-based financing programs are generally unsecured in terms of requiring collateral. 

Do business loans count as revenue?

It is not considered part of your taxable income when you receive a business loan from a lender. The loan doesn’t contribute to your revenue stream.

What is a revenue loan agreement?

A company can get money from lenders by agreeing to make payments with a percentage of gross revenues. These loans are known as “revenue” or “net” wagers and come in many terms, much like traditional business loans. 

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