Revenue Loan Terms
Revenue-based financing is a type of capital to support small and growing businesses with highly recurring revenues. These loans fix the repayment of the loan to a portion of the actual revenues received by a business. Revenue loans are typically only used for growing SaaS businesses with a well diversified client base.
Size and shape
Revenue loans are highly customised to each situation and company. We spend a lot of time discussing this with companies ahead of time.
- Size: this is driven by the amount of recurring revenues in the business, we would typically lend 1/3 of the annualised revenue runrate of the business, up to £4 million
- Repayment profile: monthly, based on your monthly revenues. At the start of the loan a % of the revenues are agreed – in the range of 1 to 10% of revenues
- Duration: 3-4 years though this depends on the revenues of the business because the repayments are not fixed. The loan is simply repaid once we have received the loan amount plus an agreed cap
- Collateral: secured on all assets
- Covenants: no covenants.
BOOST&Co’s return comes from a combination of a “cap” and an exit fee:
- Cap: is the amount in addition to the capital of loan loan which needs to be paid back. This is the equivalent of interest payments, but because payments are not fixed it cannot be calculated as interest. This is typically 0.5x to 1.5x of the amount we lend.
- Exit fee: 25-50% of the amount lent, only triggered if there is an exit event (sale of a majority stake of the business or IPO).
One of the main advantages of revenue loans is the simplicity of their structure. They are documented as a simple loans with a debenture.
Revenue Loan by BOOST&Co
BOOST&Co has been crafting loan solutions to SMEs for more than a dozen years. If you want to discuss how we can work together to create a revenue loan solution, give us a call, or leave us some information about your business.