Choosing the right financing option is more than a fiscal decision for small business owners—it's a strategic move that can shape the future of your enterprise. This blog is dedicated to unraveling the complexities of two popular choices: the Revenued Business Card and Ecommerce Revenue Based Financing for Shopify, Amazon, and Toast merchants.
We're not just comparing financial products; we're exploring how these options can align with or diverge from your business's unique rhythms and demands. Through this detailed analysis, we aim to empower you with the knowledge to make a choice that fits your business's specific needs.
RBF offers an immediate influx of cash but comes with strings attached. It's known for fixed finance fee amounts, which translate into significant repayment amounts. This option can be less adaptable, especially for businesses with fluctuating sales, as repayments are tied to daily credit card receipts. Underwriting is based on your sales as they flow through the system.
RBFs' repayment structure is linked with your business's daily credit card sales, like Merchant Cash Advance. The amount you repay daily directly corresponds to how well your company performed regarding credit card transactions. On days with high sales, your repayments will be larger, but during periods when sales dip, your repayments decrease accordingly. If your sales increase beyond what you expected, you will pay down your advance more quickly without reducing your finance costs.
This model offers flexibility as it adapts to your business's earning patterns. However, it can also pose challenges, particularly for companies with seasonal fluctuations or inconsistent sales. It's crucial to consider whether this variable repayment schedule aligns with your business's cash flow and whether your business can incur higher financing costs as sales ramp.
The speed of accessing funds through an RBF is a significant advantage for businesses facing immediate financial needs. Typically, the process of finding an application can be completed within days. This rapid turnaround time is particularly beneficial for businesses that need to respond quickly to unexpected opportunities or emergencies. However, it's important to note that while RBFs are easy to apply for in your customer portal, there is limited visibility into the timing of the decision or the reasons for approval or denial of credit.
RBFs offer a high degree of flexibility in how funds can be used. This lack of restrictions allows business owners to allocate the capital as needed, whether for inventory, equipment, expansion, or emergency expenses. This flexibility can be a substantial advantage for businesses that require the freedom to allocate funds across various needs.
However, how an RBF is managed can indirectly impact a business's credit profile. Although RBFs typically don't involve a traditional credit check, the fluctuating daily repayments tied to sales can significantly affect a business's cash flow. A business struggling with these repayments can lead to financial strain, which may indirectly affect creditworthiness. This potential impact on cash flow and credit health is an essential consideration for businesses evaluating the suitability of an RBF.
RBF is usually tied exclusively to the platform, using its sales data to provide financing. If you are using more than one platform, for example, selling on Shopify and Walmart, you can’t use your Walmart sales to qualify for the Shopify RBF. This may reduce the amount of financing you can qualify for.
Here's where the Revenued Business Flex Line shines. Revenued Flex Line allows you to draw funds as needed and charges a factor rate only for the amount used. You can also use the Pay Now feature to return unneeded funds. This flexibility ensures you're not overburdened with an oversized lump sum and associated costs.
The Revenued Business Flex Line's flexibility is a standout feature. Instead of the fluctuating daily repayments associated with RBF, the Flex Line estimates a fixed daily payment that is not increased if your sales go up. It does include a True Up feature that you can access in your customer portal if your revenues decline so you can adjust your payments downward. This flexibility allows for more manageable financial planning and can benefit businesses with variable income streams.
Tailored for small business needs, the Revenued Flex Line offers generous spending limits. Revenued is one of the few fintech offering Flex Lines from 150k to 750k. Spending limits are initially set based on your business’s cash flow and may be increased based on your payment history with Revenued.
Using bank data through a Plaid connection is another crucial aspect of the Revenued Business Flex Line. It offers spending limits based on the total revenue flowing through your bank account, not just your e-commerce platform. For brick-and-mortar merchants or multiplatform businesses, this can increase the funds you are eligible for.
Real-World Scenarios
Let's apply these features to typical business scenarios:
Seasonal Inventory Management: When a retail store prepares for a high-demand season, the Revenued Business Flex Line allows inventory to be purchased as needed. This contrasts sharply with an RBF using recent transaction data capping availability at historical levels.
In summary, while offering swift access to funds, RBF tends to have lower available funds and a rigid repayment model. In contrast, the Revenued Business Flex Line, with its approach centered around user convenience, provides more competitive capital availability and flexible repayment options. Revenued features make it a more economical and versatile choice for small businesses.
As you evaluate your financing alternatives, it's crucial to consider how each option aligns with your business's specific requirements and future growth plans. The Revenued Business Flex Line emerges as a solution that addresses immediate financial needs and supports long-term financial health and scalability.
Revenued’s Flex Line purchases future receivables, not a credit card or a loan. This service is unrelated to the Revenued Card and is not offered or sponsored by Sutton Bank.