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Our curated biweekly guide provides in-depth financial explainers, practical tips and how-to guides, and timely financial and economic updates. Whether you're looking to master the art of strategic budgeting, explore digital marketing strategies, or navigate the intricacies of business financing, this newsletter has you covered. We're here to empower you with actionable insights that can make a real impact on your small business. 

As a small business owner, securing the right funding can be the key to unlocking your company's growth potential. But navigating the world of business financing can often feel overwhelming. In this edition, we’re simplifying the journey by breaking down essential financing options and steps that every business owner should know. From exploring alternative funding methods like revenue-based financing to preparing the right documents for a loan application, this guide will help you move closer to securing the funding your business needs. 

What to Know About Revenue-Based Financing 

For small businesses that have grown tired of the old process of raising venture capital or who have been turned down by lenders when trying to get financing to grow, revenue-based financing (RBF) is a great alternative financing option to keep in mind. 

Different from conventional loans and debt financing or equity investment, revenue-based financing (sometimes referred to as revenue-based funding or merchant cash advance) offers a dynamic approach to funding, aligned closely with a business’s revenue trends. This financing model is non-dilutive, which means it doesn’t take your equity. It’s also flexible to your company’s natural ups and downs. That’s why RBF is gaining traction with business owners who want financing that is flexible and easy. 

Understanding Revenue-Based Financing 

Revenue-based financing is a novel approach to funding where businesses receive capital in exchange for a percentage of their ongoing gross revenues. In this model, the repayment amount fluctuates in tandem with the company’s sales performance, providing a flexible repayment structure. 

How Revenue-Based Financing is Different: 

Under revenue-based business funding, a company agrees to pay back the principal amount plus a fixed fee, calculated as a percentage of future revenues. This percentage is typically between 3% and 8% of the company’s ongoing sales, varying based on the terms of the financing agreement. Unlike traditional loans with fixed monthly payments and interest rates, RBF adapts to the company’s revenue cycles, increasing during high-sales periods and decreasing during slower times. And unlike venture debt and royalty-based financing, the obligation between the business and the funding company stops exclusively at actual received revenues and does not extend into the company’s equity or other assets. 

Ideal Candidates for RBF: 

This financing model is particularly well-suited for businesses with high gross margins and predictable revenue streams. It’s a popular choice among medical practices, e-commerce retailers, restaurants who experience seasonal fluctuation. Additionally, RBF is attractive to companies looking to preserve equity and control, as it doesn’t require giving up company shares or board seats. 

RBF’s suitability extends to businesses seeking capital to fund growth initiatives like marketing campaigns, inventory expansion, or product development, without the pressure of fixed repayments that traditional loans impose. 

It should not be confused with revenue-based business loans, which are traditional loans that are underwritten using a company’s revenue instead of its assets. Instead, RBF is not a loan. 

Click here for the full guide on benefits of Revenue-Based Financing, how it works, and key considerations when evaluating if it’s the right funding option for your business. 

All the Small Business Funding Documents You Need Explained 

Small business owners often find the funding application process intimidating, but being prepared can make all the difference. Whether you’re exploring Revenue-Based Financing (RBF) or more traditional loan options, knowing the documentation requirements upfront will simplify the process and speed up approvals. Most funding providers have a standard set of documents they need, typically covering up to two years of business history. While not all funders require two years for every document, being prepared with this information ensures you're ready to navigate the funding process. 

Core documentation needed for a small business loan 

When you apply for a small business loan, the lender is essentially trying to figure out one thing: what is your ability to repay the loan? Whether you’re applying for a working capital loan, a term loan, an SBA loan, or something else, this is true for just about every type of small business loan. The lender wants to know your debt and income and will use things like financial statements and credit history to help them decide. With that in mind, let’s break down the list of documents that lenders will ask small business owners to produce as part of the loan application process: 

Bank statements: Your bank statements show lenders how much cash you have on hand, your cash flow in and out of your bank account, and provide a general understanding of your business's financial situation. You will need to produce bank statements for all of your business banking accounts. Bank statements are generally easy to produce and are available via online banking. As a general range, you will be asked to produce anywhere from 3 months to two years worth of bank statements depending on your situation. 

Credit statements: Another way to help lenders assess your ability to repay a loan is to understand your credit. This might mean they will want to obtain your personal credit report in addition to your business credit report. A good credit score will increase your chances of being approved for a loan. 

Tax returns: Around two years of both corporate and personal income tax returns might be requested by the lender. The lender will use the tax returns to understand how much money you’re earning, the sources of income, and if it’s been consistent over the last few years. This will also factor into your debt-to-income ratio. 

Financial statements: The lender will ask for your business financial statements including a balance sheet, income statement, and statement of cash flow. Similar to the documents above, these financial statements will help your lender understand your business’s financial situation and ability to repay the loan. These financial statements should be up to date and accurate. 

Check out the other core documentation to prepare and see an overview of what to expect in the loan application process here.  

Tips for Getting Your Small Business Funding Approved 

When your small business is ready to grow—whether through expansion, new equipment, or managing cash flow—having access to capital can be the difference between success and stagnation. While traditional loans are one option, they aren't always easy to secure, with 28% of applicants being rejected or only partially approved . That’s where alternative options like Revenue-Based Financing (RBF) can come in. By understanding both RBF and traditional lending requirements upfront, you can increase your chances of obtaining the capital you need to fuel your business’s growth. 

In order to receive financing, you need to show them that your business is sound, that your future is secure, and that you will be able to pay back the money they lend you with interest. And the way that you prove this to them is through a detailed loan application. In this article, we’ll walk you through the tactics and tips that can help you navigate the loan application process and increase your changes of timely approval. 

What Are Banks Looking for When Reviewing a Business Loan Application? 

The key factors banks are looking for in your application are referred to as the “5 C’s of credit” and include character, capacity, capital, collateral, and conditions. 

Character: Lenders want to see that you are a responsible borrower, so will check your credit history, looking to see if you have a history of making debt payments on time. If you’re a startup or new business owner, having a good personal credit score can also help. 

Capacity: Capacity measures your ability to repay the loan. Lenders will closely examine your business’s cash flow, revenue, and existing debt obligations to determine if you have sufficient income to cover the loan payments. If your business has been showing consistent cash flow for years and you can demonstrate solid financial performance, it will help you convince lenders that you are able to take on additional debt. 

Capital: Capital refers to the amount of money you’ve personally invested in your business. If you’ve self-financed your business, it shows investors that you’re highly committed to its success and that you’re confident in the direction it’s headed. Lenders like to see this, and will be more willing to offer you financing because you have skin in the game. 

Collateral: Collateral refers to assets that you pledge as security for the loan, including business assets, real estate, equipment, or inventory. Collateral reduces the lender’s risk because it provides a way to recover their money if you default on the loan. If you don’t have a very strong application, offering up more collateral may be enough to get the lender to still offer you financing. 

Conditions: Conditions include the overall economic environment, industry trends, and how you plan to use the loan. Lenders will consider how external factors might impact your business’s ability to repay the loan, and they will want to know how the loan will help you improve your business over the coming months and years, as this will be key to your ability to repay them. 

Review tips for getting your business loan approved and ways to prepare for a business loan application here.  

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