FREQUENTLY ASKED QUESTIONS
What is Revenue Based Financing?
Revenue Based Financing (“RBF”) is a cross between equity investment and debt financing. It encompasses the best attributes of these investment types for both the entrepreneur and the investor. For the entrepreneur, it provides capital that is paid back over time like debt. Unlike traditional debt Sage's version of RBF doesn’t require personal guarantees or collateral (some RBF providers do require personal guarantees and/or collateral), and the payments vary based upon your sales. For the investor, it provides equity-like returns over the short term. Unlike traditional equity, when you pay back the investment plus a pre-negotiated return, the investment is done and the investor is not on your capitalization table permanently.
How do I repay the Investment?
The investment is repaid over time (in our case, we are aiming for 3-5 years) through a percentage of your revenue (we call this the “Revenue Rate”) until the pre-negotiated return (we call this the “Investment Return”) is reached.
What is the Revenue Rate?
The Revenue Rate is the percentage of your revenue (actually Cash Receipts - see below) that is used to pay down the Investment Return each month. This payment varies based on the amount of Cash Receipts you have each month but the percentage stays consistent. We aim for the percentage to be between 3-8%.
How is Revenue calculated?
Although it is called Revenue Based Financing, to save everyone (entrepreneurs and investors) a huge headache of figuring out GAAP Revenue every month and to enable you to manage your cash flows more easily, the payment is actually taken from Cash Receipts (i.e. customer payments). This system results in larger payments being made when your company has more actual (not financial) cash and smaller payments when less cash is available.
What is the Investment Return?
The Investment Return is the total amount that your company pays over the life of the investment. This amount is negotiated up front between you and Sage. We generally look to receive 2x to 3x our initial investment (i.e. we invest $100K than we would look to receive $200K to $300K over the life of our investment).
Why is a variable payment a good thing?
Is RBF Expensive?
How does the Investment end?
What if I don’t repay the investment on time?
What makes Sage Growth Capital unique?
Unlike many RBF investors, we do not secure the investment with personal guarantees, UCC filings or other restrictions. This preserves your ability to arrange other financing. And unlike other RBF investors, we do not maintain an equity ownership after the Investment Return has been reached.
Why do you call this ‘flexible’ financing?
As described above there are a number of key variables that impact the investment: the Revenue Rate, the Investment Return and the timeframe over which the investment is redeemed. These variables all factor into the pricing that we offer and can be adjusted to meet both the needs of the entrepreneur and Sage’s investors. During the due diligence process, we will ask what is most important to you: Total amount repaid? Timeframe of the investment? Size of the Revenue Rate? We then offer terms incorporating those preferences.
How much $ do I qualify for?
The amount we can invest is dependent primarily on your current and projected sales. This calculator will give you an idea based upon a single point in time, your current monthly sales. As part of our diligence process we will request financials so we can see actual sales for the last 18 months and projected sales for the next 36 months in order to compute how much you may quaify for.