An investment is made in a company where a fixed percentage of the gross revenue is used as payback until the expected return is met. There is no need to give up ownership rights or share control.
To best describe the functions of this type of funding, an example would be best.
Let’s work with the following parameters:
Company A is doing $100,000 per month or $1,200,000 per year in revenue. First step would be to look back at the revenue and gross margin for the past 12 months and determine what percent of that revenue is feasible to lend on. A future return is determined and a fixed percent of revenues established as a means of payback to meet that repayment goal. The transaction is then funded. As revenues fluctuate the payment amount will fluctuate since it remains as a fixed percent of the revenue.
No Balloon Payments
No Personal Guarantees
Varying Payments Amounts
Ownership Remains In tact
$500,000-$25 million annual revenue
Two years of establish operations
Businesses showing profit preferred
Funds are available in weeks
Early stage businesses that are scrutinized by the bank.
Businesses that need to place capital quickly.
Businesses lacking the bank required collateral
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