Most RBF providers prefer to work with businesses that have been in operation for a minimum amount of time (e.g., 12+ months), have a minimum annual revenue (e.g., $100,000+), and a minimum personal credit score (e.g., 500+).
A basic amount of information about the business and its owner, along with reasonable documentation, is typically required to verify the business’s banking information.
The RBF provider evaluates the business’s financials and growth potential to determine the amount of financing and payment terms. Many perform a credit check to verify identity and creditworthiness.
If approved, the provider issues an approval, with the terms being offered for the customer’s consideration, including how much capital is being offered, the total cost of funding, and the estimated payment term.
Upon both parties signing the RBF agreement, the RBF provider transfers a lump sum of upfront capital to the customer’s business bank account, often within 24 hours.
The business remits payment, which is a percentage of its revenues, to the RBF provider. That percentage is usually automatically withdrawn from the business bank account according to the agreed upon payment schedule.
If there’s a decrease in revenue, the amount the business is obligated to remit to the provider also decreases, without fees or penalties. The total payment amount to be remitted to the provider is fixed, no matter how long the payment period lasts, without interest ever accruing.
As an example, for $10,000 of upfront capital, a business may remit a total fixed amount of $13,000 in revenues, which would never change, as long as the customer abides by their contract.