Revenue Based Financing

What is Revenue Based Financing?

SMBs and startups in need of financing have been underserved by traditional financial actors (including banks and VCs), especially in emerging markets. These entrepreneurs are looking for innovative ways to connect with lenders that would help them achieve their business and growth objectives. Fintechs are evolving to fill this gap that traditional finance (TradFi) has not been successfully able to cover by offering Revenue Based Financing (RBF) solutions that are more flexible, scalable, and better adapted to the needs of SMBs and startups.

Revenue Based Financing (RBF) is the process of lending funds in exchange for a claim on the borrower’s revenue. RBF solutions enable real-world businesses to access capital in a flexible and efficient way. Through RBF, fintechs and specialized underwriters can provide alternative financing solutions to SMBs and startups around the world to support their business growth, allowing these borrowers to access funds while avoiding inflexible debt conditions or diluting their capital by giving up equity.

Through Atlendis, fintechs exploring RBF solutions will be able to tap into a new source of liquidity that can enable them to expand their financing operations and serve even more SMBs and startups. Effectively connecting decentralized finance (DeFi) with a market that has an estimated CAGR of 61.8% (2020-2027).

Fintech companies have access to more treasury, revenue, and accounting data than banks and TradFi actors through APIs (open banking) and therefore, they can more accurately assess risk and provide loans in this vertical. The adoption of blockchain technology is further enhancing this trend of transparency and facilitating critical information sharing to extend capital efficiency.

Business Challenges

Starting a business is challenging and SMBs and startups need capital to grow. Traditional business financing has not evolved over the past decades and is not adapted to entrepreneurs who are often subject to high loan application failure rates. Small businesses in need of financing are faced with a range of obstacles, such as: lack of capital investment, no credit history, insufficient time in business, and lengthy loan application processing times, among others.

Small businesses also struggle with operational delays in traditional finance due to slow payment transfers. It can take 3–5 days for a wire transfer to clear or for third-party financial institutions to release funds.

Raising capital from VC investors is both expensive and time-consuming, and many early stage businesses do not want to dilute their equity. Obtaining a traditional loan is not easier, as credit checks and loan application processes are rigorous and focused on revenue regularity and current financial standing, instead of considering a SMB or startup’s future growth potential.

How does Atlendis address Revenue Based Financing?

• Atlendis provides access to a new alternative source of liquidity that RBF fintechs can use to expand their activities and contribute to the growth of SMBs and startups in need of funding.

• Atlendis enables RBF FinTech companies to access funds on the blockchain by opening a pool on the protocol RBF fintechs can then borrow digital assets from Atlendis lenders to issue RBF loans to their institutional customers.

• Leveraging blockchain’s transparency, immutable ledger, cost and time efficiency and security, FinTechs issuing RBF loans can optimize their flow by cutting time, costs and accounting overhead to improve their business overall.

• Atlendis allows a multitude of new actors to lend and participate in the growth of SMBs and startups, while the RBF market in traditional finance is gated to high-net worth or institutional investors.

Benefits for Lenders to use Atlendis for Revenue Based Financing

• Liquidity providers can access a new investment product and fund real-world business opportunities, on-chain.

• Lenders looking for a more diversified portfolio can gain exposure to financing high-growth RBF fintech companies.

• Lower barriers to investment, as transferring digital assets on the blockchain offers seamless P2P transactions and a market environment that is accessible to everyone.

• Blockchains provide an immutable log of all transactions across the network, resulting in significantly higher levels of reliability and transparency compared to traditional forms of centralized record-keeping.

• Facilitated performance reporting for professional lenders.

• Enhanced risk-adjusted yield compared to private credit lending in fiat due to complementary crypto native returns (liquidity mining, rewards and staking).

Benefits for Revenue Based Financing Fintech Borrowers on Atlendis

• Global accessibility.

• Quick access to funds that scales as your credit history improves.

• Access to on-chain retail or institutional liquidity, and a broad range of digital assets.

• On-demand or recurring funding.

• Lower operational and back-office costs.

• Limited amount of intermediaries.

• Blockchain technology provides more transparency over the source of funds and as an immutable ledger, it reduces accounting overhead.