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September 4th 2020

Revenue-based loans

A number of "innovative finance providers" including Uncapped, Uplift1 and Fleximize now offer "revenue-based" finance to small businesses across the UK.

Raising finance is a major challenge for many start-ups; founders may be reluctant to give up equity and may also be concerned about the business's ability to repay traditional debt finance, in the event of a deterioration in trading conditions.

The concept is simple: loan repayments flex according to the amount of revenues generated by the business each month; in good months, repayments go up; when revenues decline, so do the repayments.

Uncapped, for example, offers flexible loans from £10k to £2m, with a 6% arrangement fee and no PG required in some cases; Fleximize offers loans up to £500k and also offers some very short-term (3 - 12 months) bridging loans.

These providers are not suitable for all types of business; primarily they are targeting those with reasonably predictable revenue streams; think subscription-based businessses and online traders (e:commerce, SaaS, mobile apps and games, marketplaces).

Nevertheless another interesting development in the innovative finance space and a viable alternative to traditional debt products for some.

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