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As a founder, sourcing the right funding in India can be challenging. While the B2B SaaS industry is booming in India, not all founders want to give up equity to venture capital funds or angel investors.
The 92,683 startups in India in 2023 have paved the way for other alternative financing methods — including revenue-based financing.
With one of the largest tech sectors in India being FinTech, it makes sense that necessary capital is required to scale. But what is revenue-based financing (RBF), and why should you care? Is it a reliable funding method, or is it just another trend that might fade away?
Let’s dive in.
What is revenue-based financing?
Revenue-based financing delivers startups flexible access to capital without dilutive equity issuances or burdensome debt obligations. Providers supply an upfront cash infusion, then recipients repay that principle plus a financing fee over a 6-24 month term through fixed periodic installments.
It’s conceptually similar to debt because it includes a borrowing of dollars upfront, with smaller payments over time and a repayment of the dollars at the end. In some cases, the smaller payments over time take the form of a percentage of revenue, while in others they are predetermined fixed rate payments.
With revenue-based financing, no compounding interest accrues like standard loans. And founders don't lose control through diluted equity like venture capital.
Example of revenue-based funding in India
Imagine you're a founder of a thriving FinTech startup landing major enterprise deals guaranteeing recurring sales. You need to hire developers quickly to meet rollout demands.
You’d like to secure $500k in funding to hire new employees and scale further, so you contact Efficient Capital Labs for RBF. Based on your revenue, you get an offer for $500k in funding with $550k owed in repayment over a 12 month term. Each month you repay 1/12th of that full amount (~$45K).
How does revenue-based financing work in India?
Many Indian startups use revenue-based financing because other funding options fall short. Venture capital concentrates on late-stage mega-rounds, neglecting earlier capital needs. And banks require complex collateralization that most business owners don’t want to deal with.
Leading revenue-based providers rapidly analyze applicant cash flows via their own lending technology. This minimizes the time investment required from a founder. It also enables quick credit decisions tuned to India's occasionally unpredictable economic conditions.
Once approved, companies can access non-dilutive funding from ₹10 lakhs up to ₹10+ crore. They then repay either with predetermined fixed payments over a fixed term, or by diverting 3-15% of revenue over 6-24 month terms until reconciling the principal.
Benefits of revenue-based financing for companies in India
Let’s explore the specific benefits of revenue-based financing for companies in India.
No Equity Dilution
RBF is a form of non-dilutive funding, meaning that founders get to retain all equity while getting access to large amounts of capital. Founders keep all the upside, avoiding dilution from venture capital - which ensures they are able to hold on to board influence, as well as the financial upside when their business grows.
Forming a partnership with an RBF provider helps these companies stay true to what they want to do and how they want to scale their business.
Speed of Funding
In India, obtaining funding through traditional banks or even venture capital can be a lengthy process, requiring extensive documentation and due diligence. RBF providers, on the other hand, often leverage advanced technology to assess a company's financial health quickly, enabling faster access to funds.
For instance, Efficient Capital Labs can deliver funds in just three days. This rapid funding process is crucial for startups needing to capitalize on market opportunities swiftly.
VC Preservation of Control
For Indian startups, retaining control over their company is paramount. RBF allows founders to secure funding without ceding equity or control to venture capitalists. This is especially beneficial in a market where there's lower access to venture capital, and the available VC funds may demand significant equity stakes.
No Collateral Needed
Traditional financing in India often requires collateral and warrants, which puts a company’s assets at risk. RBF eliminates this requirement, offering a safer funding route. This aspect is particularly appealing to Indian founders who are cautious about losing control of their company in the case of financial underperformance, which is a risk when going through banks.
More Affordable Than Equity Funding
RBF is particularly affordable when you weigh the implied value of funding. When you don’t have to give up equity, you get to retain full ownership. For example, in a company valued at $20 million, 20% equity would be $4 million - which is considerable.
Leveraging RBF, you pay a cash fee for long-term growth and scale. This is much less expensive than equity over time.
Best revenue-based financing companies in India
Looking for revenue-based financing in India? Here are the top options:
1. Efficient Capital Labs
With Efficient Capital Labs (ECL), companies can get RBF up to 65% of their ARR or up to $1.5 million. You get a flat fee with a repayment schedule based on revenue projections. Plus, you can get funding in three days without having the need for complex credit or asset checks.
With an easy 12-month repayment window and transparent 12-15% fees, your SaaS startup can access truly borderless financing.
Offering Details:
- Revenue-based financing with flat 10-12% fees for USD or 12-15% fees for INR
- Offers in INR and/or USD
- Funding in less than a week
- Easy and flexible repayment plans
ECL’s revenue-based financing comes with no hidden fees or unnecessary credit inspection. Just upload your revenue data and you can secure your funding in less than a week.
2. Klub
Klub offers growth financing to consumer-facing and digitally native brands across various sectors, including fashion, eCommerce, and subscription. Financing solutions range from ₹5 Lakhs to ₹30 Crores, with set repayment terms through fixed revenue share agreements.
Offering Details:
- Financing from ₹5 Lakhs to ₹30 Crores for consumer-facing businesses
- Three funding types: Blaze, Gro, and Aceler8
3. Velocity
Velocity provides revenue-based financing to eCommerce and digital businesses in India, offering funding amounts up to ₹4 Crores. The repayment is structured as a revenue share of 5-10% over terms ranging from six months to two years.
Offering Details:
- Funding up to ₹4 Crores with a 5-10% revenue share
- Repayment terms from six months to two years
4. GetVantage
GetVantage provides revenue-based financing for D2C brands, marketplaces, and SME startups in India. Financing ranges from $20,000 to $500,000 with a flat fee structure. To qualify, you need 12 months of revenue history, $6,000+ MRR, and have 40% of your payments processed online.
Products & Offerings:
- Revenue-based financing, fixed-term loans, SaaS runway capital, marketplace seller financing
- Financing ranges from $20,000 to $500,000 with a flat fee
Read our full GetVantage review here
5. N+1
N+1 Capital provides revenue-based growth capital to emerging companies in India, advancing amounts from ₹1-15 Crores. The platform offers up to four times monthly revenue without collateral or equity warrants and features flexible repayment terms based on monthly sales.
Offering Details:
- Funding from ₹1-15 Crores, up to 4x monthly revenue
- Flexible repayment terms based on monthly sales
6. Recur Club
Recur Club offers an automated exchange for subscription businesses to secure non-dilutive growth capital by trading future revenue streams. The platform advances up to 50% of a company's ARR with fixed percentage repayment terms over 6-24 months.
Offering Details:
- Up to 50% advance on ARR for subscription businesses
- Repayment terms over 6-24 months based on a fixed percentage of revenue
Read our full Recur Club review
More About Revenue-Based Financing in India
As a founder, asking the right questions is key to success. So that’s why we’ve compiled the five most common questions to consider:
Why should I take revenue-based financing?
Revenue-based financing offers several advantages, including preservation of company equity, fast time to funding, low cost compared to alternative funding sources, and more.
What are the rates for revenue-based financing?
While every company is different, with Efficient Capital Labs you can expect a typical fixed fee rate to range from 12% to 15% charged on the capital that companies access (INR) or 10-12% (USD). The amount repaid each month varies based on the risk, desired repayment time frame, and other factors. In total fees, the above translates to a repayment of either 1.12-1.15x (INR), or 1.10-1.12x (USD), of capital secured.
What is the tax treatment for revenue-based financing?
Taxes on revenue-based financing function similarly to income taxes on traditional debt obligations. The financing costs count as expenses, reducing net taxable profit amounts.
How is revenue-based financing different for B2B and B2C / D2C?
B2B SaaS companies generate steady revenue streams from ongoing subscription plans. Their focus on optimizing the back end, reducing churn rate, and keeping MRR steady, makes them the ideal candidate for revenue-based financing. For other B2B companies, suitability will depend on their business model.
For B2C and D2C brands, their focus is typically on the front end. They’re constantly acquiring new customers because the products they sell typically cater to that type of business model. Therefore, revenues can be slightly more inconsistent, making it harder to qualify for RBF. However, there are tailored RBF solutions for these types of brands.
Access Revenue-based Financing in India
Finding financing partners that share your values and can provide you with non-dilutive funding enables startups to best navigate uncertainty. After all, the alternatives are venture capital or bank loans that come with rigid, high interest rates.
If you need revenue-based funding, Efficient Capital Labs can supply fast, non-dilutive capital to Indian startups in either INR or USD through rapid underwriting. ECL also provides capital to startups operating in many other geographies, with a base in either India or USA. Their consistent client-focused approach builds trust and understanding quickly.
Here’s what you get with ECL:
- Revenue-based financing with flat, transparent fees
- Funding in less than a week
- Easy and flexible repayment plans over 12 months
- No dilution
- A trustworthy partner for your financial needs
ECL provides consistency and runway support without restrictive financing structures potentially inhibiting independence. They’re the only RBF provider that can underwrite a customer’s revenue across all markets that it operates in.
They also have customers that operate in one single market, and their SaaS-based underwriting model is built to give all customers the best rate they can offer.
See how flexible funding enables you to scale without external influence or loss of control.
Get matched financing in just 72 hours with Efficient Capital Labs.
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