Crowd2Fund have recently launched the ‘Revenue Loan’ and CEO, Chris Hancock, talks to us about what this means for the future of lending.
The Revenue Loan is a completely unique type of lending which is perfect for early stage or seasonal businesses because they repay the loan as a percentage of company revenue. This means that businesses are not tied to fixed monthly repayments, giving them more agility to grow quicker due to a more manageable cash flow.
This new lending type is also accessible to earlier stage companies who have been profitable for at least six months and who may not qualify for bank lending or not wish to sell company equity.
The benefits for businesses are obvious, but revenue lending is also attractive for investors because they achieve higher returns, normally around 10%, which is a result of providing the flexibility to businesses rather than lending to riskier businesses, whilst being secured and guaranteed the same as any other loan.
We have already completed the UK’s first ever revenue loan with repayments due to be completed in just three months (despite the two year forecast). The company, Glen Rothay Hotel, was established in 1624 and is based in the Lake District. Based on a technicality, they were unable to get a bank loan despite clearly being a creditworthy business, but, due to the seasonal nature of the business, the 40k revenue loan was a perfect fit and allowed them enough cash flow to undergo refurbishment works during low season.
We are also hugely excited to have launched our latest revenue loan campaign for RuRoc who are a well established ski brand, providing safety crash helmets for the snow sports sector, turning over more than £1m per year. This goes to show that the appeal of the revenue loan attracts mainstream businesses and why I expect this type of lending to accelerate in growth exponentially within the UK, even more so due to the large number of newly profitable companies who are now seeking a loan rather than being forced to sell company equity.