No more RBF loans from Uncapped
Today we’ve made the easy decision to completely stop offering Revenue Based Finance (RBF) to our clients.
The reality is that we haven’t offered this type of loan to customers for over a year unless they expressly asked for it. Instead, we’ve moved to fixed-term loans, where we agree the loan amount upfront with the client and when it will be repaid.
The below infographic shows Uncapped’s finance offering over the past few years and, as is evident, we have been moving away from RBF for some time.
Why are we doing this?
Revenue-based loans were the original idea behind Uncapped and, at first, they seemed like a win-win option. This was because:
- With fixed fees, clients had simple, transparent pricing
- Repayment tied to the revenues meant that clients only repaid when they generated sales. This meant less risk for the merchant, given they supposedly would be always able to repay the loan
Unfortunately, RBF loans are not the best funding product for high-quality businesses.
The best clients kept growing fast (and accelerated further after they took funding from us!) which meant they repaid loans much sooner than expected. On the other hand, worse quality clients didn’t see revenues materialising, and repayments took much longer time.
So realistically what it meant was that loans were cheaper for lower quality businesses who experienced sales struggles, while the best companies were penalised for repaying their loans quicker and charged a very high cost of debt, simply due to their growth trajectory.
Realising this, we knew we had to make a change and offer a solution with the best interest of our high quality customers in mind.
We launched fixed-term loans
At Uncapped we started offering loans with fixed repayment schedules in 2021. We thought this loan structure would be simpler for clients and give them more certainty over cost and repayment schedule.
Immediately our theory was proved correct and we saw clients truly preferred the certainty of fixed-term loans in comparison to the potentially misleading RBF option.
And as the above graph indicates, our theory remains true to this day with no new RBF deals underwritten in 2023.
End of RBF
And today we officially stop offering RBF loans as a funding option offered by Uncapped.
To the founders still using RBF, we encourage you to review this mindset and explore the more future-proof and beneficial options offered in today's market. However, if you’re intent on exploring or continuing RBF as an option, below is a list of a few companies, that still offer them:
- Wayflyer
- 8fig
- Shopify
- PayPal
- Outfund
However, if you are interested to learn more about healthier, more sustainable and greater potential financing options, we’d love to show you what working with a lending partner should look like!
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