Many entrepreneurs know that financing a business is expensive. How do you make sure that you’re choosing the right financial products for your business?
At Capchase, we care about helping founders make good decisions. We encourage you to research your options — that means having open, direct, and transparent communication with potential providers. Knowing your options for obtaining capital is a must.
We wrote this guide to help you make the right decision when choosing your financing partner.
Revenue financing is a type of alternative financing, outside the institutional finance system of banks and capital markets. These alternative financing solutions have emerged due to shifts in the economy, as traditional banks tend to evolve slower than newer solutions.
As an example, Capchase’s programmatic financing solution is for monthly or annual recurring revenue (MRR or ARR) based business models. It is a solution designed for the use case of near-real time access to capital, in moments when companies need access to funding quickly.
Capchase uses a proprietary CapScore™ software that integrates directly with our customer’s financial systems to calculate ideal monthly payments. Behind the scenes of this software, a team of highly sophisticated underwriters is powering the success of the lending relationship, and a team of highly specialized growth advisors are providing white-glove service and analysis for continued growth.
Alternative financing capital can be applied to a variety of use cases. Here are some example ways that Capchase customers use our revenue financing solution, for instance:
For example, many of Capchase’s startup customers use our lending products to manage the overall efficiency of capital and cash from their venture rounds. Because founders do not need to give up equity to access revenue based financing, it’s possible to extend the shelf life of venture capital, without diluting equity. Some technology-enabled providers like Capchase can approve or reject applications within a 24 hour timeframe — much faster than traditional venture capital.
When you search for revenue financing, you’ll come across names of providers that are not typical banks or credit unions. Many of these companies are themselves venture-funded startups and private investors. For this reason, revenue financing companies tend to have their own unique investing and underwriting criterion.
As a financing customer, it is important to do your due diligence. That means speaking to a person on the team, researching the company’s reputation, and even requesting direct customer references. You are well within your right to request the information you need to make a confident decision.
Here are a few different types of companies in the revenue financing ecosystem. Remember that companies may fall into more than one category:
Alternative financing is a game-changer for startups that need more tailored approaches to managing their working capital. Remember that you are ultimately the customer — it’s your right to shop around to choose the right solution for your business. To access non-dilutive financing with Capchase visit Capchase.com/Grow.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.