Are you talking about the stress and preparation of an interview with your banker? Trying to get a bank loan to finance the growth of your business is no small task. Yes, you'll most likely have to answer countless questions, but countless questions, but you'll also have to face the possibility of having your project questioned. It's not a myth that many bankers are very reluctant about start-ups and young companies, especially when it comes to a tech or SaaS company. So, is confronting your banker really worth it? Is it possible to avoid wasting too much time and energy? We shed light on the dark side of the bank loan and present you with a more advantageous alternative to start your business. 2023the Revenue Based Financing.

Understanding how a bank works 

KPIs and the expectations of a banker

As you can probably imagine, a bank loan is not always easy to obtain. You have to present a project that meets a number of criteria in order to meet your banker's expectations. These criteria are mainly based on KPIs (Key Performance Indicators). 

Here are some examples of KPIs that can be addressed:

  • Cash and liquidity ratios
  • Late payments
  • A cash flow forecast
  • Gross margin calculations
  • Gross operating surplus
  • Repayment capacity
  • The break-even point
  • The financial autonomy ratio

Obtaining your loan will also be directly linked to the credibility of your project and your power of persuasion. Indeed, to hope to obtain a business loan, it is necessary to present a clear and well-structured project

It must look realistic and the objectives must be achievable in the eyes of the banker. Your type of business plan will be scrutinised, i.e. your banker will review the market analysis and the competitive environment. They will also ask you to explain the purpose of the loan.

What about start-up tech companies?

In the case of start-ups and especially tech companies, the process tends to become more complex

Indeed, bankers are generally quite reticent when faced with this type of request: how can this be explained? First of all, tech companies are mostly very young, which means that there are not many examples and visibility on this type of company. It is not possible to draw on the past of other similar companies.

Moreover, bankers are not used to dealing with this type of clientele, so they do not necessarily have the right perspective on these projects. Creating a mobile application is not the same as making cars! Clearly, tech companies don't meet banking standards and despite some small progress on the part of banks, the situation is not going to change overnight.

Will it be possible in 2023 to collect bank funds?

As we all know, the macro-economic context tends to be so upset that bank loans are gradually approaching the usury rate. A situation that, a fortiori, will call into question any source of financing from the bank lending model. But how to sustain growth in 2023?

Fortunately, there are many complementary and non-dilutive financing solutions that can help you get around this problem while preserving your cash flow and maintaining a monopoly on your capital. Revenue Based Financing is one of these new and promising sources of financing.

What is the value of a bank loan for growth financing?

What is a bank loan?

Business credit, also known as business loans, is financing granted by banks to businesses and professionals. It is a loan that is granted under very specific conditions (the famous KPIs and criteria mentioned above) and is intended to help companies develop and boost their growth. Different types of business credit can be used, including bank loans. 

In concrete terms, a bank loan is a loan that can be repaid by the company according to monthly instalments fixed in advance by the bank. Generally, this type of credit, intended for professionals, is more advantageous and less restrictive than a classic credit intended for individuals. Among the various classic bank loans, we can mention the amortising loan, the credit reserve or permanent credit, and the credit repurchase.

The disadvantages of the bank loan

As you may have already realised, a bank loan takes a lot of time and energy to try to obtain. It is indeed necessary to prepare yourself in order to gather as much information and forecasts as possible to make your project credible. In addition to meeting the various constraints and expectations of your banker, you will then have to face certain constraints which can be quite stifling. 

Indeed, with a bank loan there is not much room for flexibility and you will be committed no matter what. In the case of a business start-up, the loan generally varies from 5 to 7 years and is most often repaid over 7 years. The longer the term, the higher the nominal rate. 

It is not suitable for all types of applications and the amount can be quickly limited. Finally, needless to say, you are not certain to get this loan...

Why is Revenue Based Financing more advantageous?

No criteria or KPIs

Revenue Based Financing is a new financing scheme that is based on the company's future revenues. This alternative to bank lending also has the advantage of being accessible to many types of businesses. 

It does not require profitability criteria or exponential growth forecasts. You don't have to build a case to convince people that your project is the best, and you don't have to want to bring ultra-innovative products to the market either! 

With Revenue Based Financing, no personal guarantees are required. At Karmen, for example, we analyse your ability to increase your income sufficiently to cover the loan payments and operating expenses.

Need financing? Find out if you are eligible for the Karmen solution.

Adaptive financing

As its name suggests, Revenue Based Financing is based directly on the company's revenues. In fact, the amounts given to the investor will be proportional to the performance of the company. In concrete terms, if your sales fall during a certain month, your royalties will be reduced. Conversely, if your sales increase the following month, the amount of money you give will increase accordingly. 

Don't worry, with Revenue Based Financing, the investor has no direct ownership in the business and does not require fixed payments. It allows digital companies to finance their growth in a non-dilutive way. It is an ideal way for companies to raise large sums of money by promising a percentage of future revenues in exchange for the money invested. 

Quick subscription

Revenue Based Financing is very quick and easy to set up. This is the type of financing we have decided to offer to companies with Karmen. No time wasted and no headaches: the financing process is 48 hours from application to receipt of funds in the recipients' bank account. 

Benefits of Karmen Revenue Based Financing
The benefits of RBF

Asking for a bank loan to finance the growth of a business is not necessarily the best strategy. You risk spending a lot of time and energy trying to convince a banker. In the particular case of a tech company, the banker may be very reluctant and the chances of getting your loan will be reduced. Faced with this situation, you can turn to another type of financing: Revenue Based Financing. This option is easy to set up and offers you more flexibility and fewer constraints.