05 Oct Revenue Loan Agreement
You may be wondering, from a legal point of view, how does a yield loan differ from a regular loan? How is it the same? If you`ve read our latest contributions on revenue-based financing, perhaps you`re wondering, from a legal perspective, how is it different from a traditional loan? About the Author: Sam Kawtharani is an experienced FinTech product manager and co-founder of Corl, a revenue-based financing option for start-ups and small start-ups. What is Revenue Based Financing? Profit-based financing (FBR), a mix of bank debt and venture capital, is a financing model in which investors bring capital to a company to get a percentage of its revenue. The company reimburses the lender or investor a multiple of the initial amount (for Corl, this varies from 1 to 2 times). For revenue-based financing, the monthly payment amount is based on the previous month`s revenue. This type of financing could be made available to companies that do not have the financial history or guarantees that a traditional bank loan would require, but that have companies that highly regulate returns. It may also be preferable for companies that do not wish to dilute their property with line or risk financing. A yield loan is an alternative financing solution that may be more desirable or appropriate for some businesses. The unique structure of the loan is attractive and they will likely be much more frequent in the coming years. Profit credit agreements contain many of the same conditions as those found in traditional credit agreements, such as: the main admission requirements that a borrower must meet are that the business must generate revenue and have strong gross margins to support credit payments and borrower operations. Recurring revenue streams from subscriptions and contracts are a plus. The monthly payment amount is calculated on the basis of the gross or net turnover of the previous month.
Therefore, the definition of net turnover is important, as is the rate applied to net turnover to determine the monthly payment. Unique conditions for revenue loans include: Corl`s revenue-based financing option offers early-stage start-ups and small opportunities.