Many people have some brilliant ideas on which they want to start their own e-commerce startup and business, but the biggest challenge faced by most of them is to fund their idea.
We seldom hear about big startup funding Like Swiggy received $2 million from SAIF Partners and Accel Partners in a seed round, Flipkart received $from Accel India, the venture capital firm, and Flipkart also received $10 million from Tiger Global Management, etc.
The retail economy is quickly shifting toward direct-to-consumer goods, and that’s great news for e-commerce entrepreneurs. There are more ways to access e-commerce funding than ever, and more types of e-commerce finance to explore, too.
Ecommerce is no longer just an alternative to buying in-store; in fact, e-commerce mega-platform Shopify predicted an increase in worldwide e-commerce sales from $1.3 trillion in 2014 to $4.5 trillion in 2021. But while the stories of those big funding are only the tip of the iceberg, beneath are numerous startups dying due to lack of funds. Therefore, this is a topic we feel is very important for anyone willing to start their own e-commerce startup.
This report tries to give an idea about the different ways to raise funds for new entrants who want to start their own e-commerce business. First of all, let us list the difficulties faced by entrepreneurs when they start exploring for funds.
Problems faced by entrepreneurs while raising funds in India
Every startup needs to understand that any investor who invests in any business is looking for returns, otherwise, they would have invested in bank FDs, Mutual funds, etc. Startups need to show their investors that they are investing in the correct business and it will surely give them a good amount of return on investment. Based on our experience and some industry experts below are some of the key reasons due to which early-stage startups face problem in raising funds for their business idea:
- Lack of commitment to build a balance sheet: Traditionally in India the owners transact more on cash basis to avoid taxes and in the process, they never built a balance sheet that could demonstrate the growth in the business over the years. Even if you have just started the business and are working at a very low scale, you must record your inflow and outflow transactions and prepare a balance sheet preferably every month or at least quarterly. Most Indian startups take this lightly.
- Lack of collateral to support the loan: In those cases where Entrepreneurs are looking for loan from a Bank this becomes very important. Entrepreneurs in India fail to build personal balance sheets supported by income tax documents, particularly while creating fixed assets. Even if their income does not come under the taxable bracket, they should file ITRs.
- Absence of a detailed business plan: This is the most important part of starting a fundraiser journey, a good concrete and detailed business plan is a must before starting meetings with the potential investors. Most Indians fall short of furnishing a detailed business plan that outlines the model, scalability, market size, competition, product development, marketing strategy, cost competitiveness, management bandwidth, and overall strategy road map. Without getting a clear picture of the business and what return it is going to fetch, it’s very unlikely that investors will invest in any project.
- Inability to assess accurate fund requirements: Many times entrepreneurs have a good idea in their head but they fail to assess the exact requirement of starting working capital required to sustain and grow their business and they quote any amount that comes to their mind like 10 Lakhs, $1M, etc. Without giving itemized and detailed requirements of funds, the expenditure plan of any business looks like non-serious and investors are not likely to take any interest in them.
- Understanding the lender’s: In India, this is another common challenge which is due to lack of guidance and experience among young entrepreneurs who are unable to think from the lender’s perspective. Due to lack of preparation, they find it difficult to demonstrate the facts and figures to the lenders. A language barrier is another deterrent that could act as a hurdle to fulfill the fund requirement.
- Your background matters: This is a big issue in India. If you have an IIT or IIM tag behind you then it becomes much easy to woo an investor but for others it is quite tough to convince the probable investor for even first round of discussion.
- Where to start: Most of the entrepreneurs don’t know where to start. This is because of the knowledge of the ecosystem, how startup funding works. We intend to solve this problem with this report by giving idea about all the possible means to raise funds for an e-commerce startup.
Now that we have listed some of the problems faced by budding entrepreneurs, let us now list some suggestions to mitigate these problems.
Suggestions to overcome funding problems:
- Business idea needs to be scalable:
This means being able to increase profits without increasing costs at an equal (or higher) rate i.e. your business plan should clearly highlight the stream of revenue and corresponding cost to achieve it. Surely it should be unique. But without scalability, it is less likely to be investable.
Usually, scalable business models have a higher profit margin and lower infrastructure and marketing investment. For this, detailed market research should be done and facts and figures should be stated precisely. While expanding, your business model needs to remain aligned with the company’s core offerings.
In other words, if the business model is likely to result in the overextension of time, money, and resources then investors will be hesitant to welcome the idea with open arms.
- Build a business model that works; don’t rely on using your competitor’s model:
The business model should support growth plans. Staying competitive might require you to approach from a different angle.
For example: “Bluestone, an online jewelry startup from India, was trying to compete with the traditional brick and mortar jewelry business market. So, they decided to focus on a made to order business model so that they didn’t have to maintain a very costly inventory. They sought investment to develop a state of the art manufacturing facility and supply chain so that they could manufacture online orders in real-time.”
- Try to outsource non-strategic aspects of your business to minimize expenses:
Startups should always try to minimize their costing for non-strategic aspects of their business.
For example: For a restaurant, having a stylish interior is a strategic aspect of your business. However, having an in-house accountant may not be the best use of funds.
Use free billing software like Zoho to record the sales and invest in a relationship with a tax professional only when needed. Make sure to use the latest automation and software technologies wherever it makes sense. All of these factors contribute to a scalable business model, which in turn, helps attract investors.
Chalking out how you are going to spend the money will require a business plan. In fact, most investors and banks will not fund your venture without a complete business plan.
Your business plan also needs to have a realistic financial forecast. You should forecast the expected cost and the investment or loan it will cover, and how much return it will generate in future. The projected statistics, facts, and figures must have an honest justification.
When investors pay you, they always expect to see how smartly you plan to spend their money, they don’t want to read a book on your business idea so be specific and concise. They will expect you to spend the funds to grow your business to its next milestone and give them a good return.
In other words, they wouldn’t be impressed if you intend to invest in fancy furniture or unnecessary automation. Milestones need to be measurable achievements such as launching a new product or reaching a specific market share, penetrating a specific market segment.
Every business will have a few rollercoaster moments. However, your business should be able to show consistent growth.
- More investment isn’t always better
More funding can equate to increased pressure to scale up your business quickly. Although it can be helpful for healthy growth, sometimes it can prove detrimental—companies that have received huge amounts of investment fail every day because they couldn’t manage the rapid expansion.
The bottom line is to ask for the amount of money your business needs and can handle.
If you receive investment, you’re accountable to your investors to do what you said you would do with their funds and be transparent if you’re thinking of changing course.
Avoid being a spending spree. Don’t spend the money on overly expensive furniture, workspace, infrastructure, equipment, business trips, and lunches. Save the splurge for when you’re bringing in more revenue.
If you haven’t assessed your technology needs already, you need to do it before spending the funds.
Find out what type of software and hardware upgrades are appropriate for your business and choose the most affordable yet feature-rich options. Technology spending should always focus on future marketing and branding successes.
- Keep your investors in the loop
As you decided to seek outside investment, your contract requires you to give investors their proper return in due time. However, showing them that their money is being put to good use will help forge a bond of trust.
Now we have listed all the problems and suggestions to succeed in starting a new e-commerce startup. Let us discuss all the possible ways to fund an e-commerce startup with its pros and cons.
Different Ways to Raise Funds
The first and simplest approach: pure organic business growth. Bootstrapping means growing the business without any external funding, investing in your growth from your profits and your own money. This is how many businesses start off and some startup founders pride themselves on never taking a penny of outside investment. It’s rarely 100% true though as bootstrapping also means taking help or money from their friends and relatives.
It is rare for any startup to bootstrap their business to infinity, since there is a limit upto which you can arrange money, obviously unless you are an Ambani or Adani, but for a lot of businesses, bootstrapping in long-term is slow and painful. However, if you are able to achieve some beginning milestones from your money then it is much easier to raise funds later by other means as investors, who feel safer always prefer to invest in projects which have conducted pilots on their own and have concrete results to show to the investors to raise funds for scalability.
A famous example of a pure bootstrap e-commerce brand is Mailchimp which is used widely even in India for email marketing, email newsletters, etc. Mailchimp provides bulk email service and was started by Co-founders Ben Chestnut and Dan Kurzius in 2000 after being laid off from web design jobs. With over $700 million annual revenue, Mailchimp is still 100% founder-owned.
Pros & Cons of Bootstrapping:
|Complete control||High risk|
|No one to answer to||Might wipe out savings|
|More focus on product||Adversely affects pace and growth|
|No Cost on Capital||Inhibits product development|
|Higher chance of profitability||Compromise & sacrifices|
- Bank loans and business lenders (Debt)
Debt or loan is probably the 2nd most favored option for most startup entrepreneurs. It means you borrow money, usually from a bank, to finance your business and repay the money with interest within a stipulated period. There are a lot of operators, offering loans across a varied range of sizes, specialties, and risk profiles. Bank loans work on the principle of high risk, high-interest rate scheme which means if your business has a higher risk then the lender will give you money at a higher interest rate.
Debt is an attractive option for entrepreneurs because it would give them complete control over their business. Loans can help you finance short terms needs like payroll, working capital, and other miscellaneous expenses without giving control of your company to others. Having said that, getting a loan from the bank is a tough task due to their requirement of various documents, collaterals, strict lending protocols, etc.
Thankfully there are various options other than banks, the credit market is huge and you can get specialized loans for particular investments in your business that might reduce costs compared to a general loan.
Overall, business loans are a sort of middle-ground for e-commerce funding. If you can bear the interest and are good at applications, it can be a good option. However, it’s also a fairly conservative way to fund and you might find it slow and bureaucratic if you’re running a startup.
If things go bad, the interest payments can rack up leaving you paying more than you expected. Also, depending on the terms and conditions of the loan agreement, it may personally affect in adverse way!
Various Kinds of loans are available, some of them are listed below:
- Term loans: A specific loan for a specific period, usually paid back via EMIs
- Asset-based loans: Credit against personal or business assets (eg: gold, land etc.)
- Invoice discounting: Loans against unpaid invoices, promissory notes etc.
- Purchase order financing: Loans to fulfill large purchase orders
- Working capital loan: Credit to finance short term expense and cash shortage
Pros& Cons of Loans:
|Lower rates of interest||Lengthy process|
|Tax benefits||Low chance of qualifying|
|Multiple options||Risk of losing the collateral|
|Retain control over business||Track record is a must|
- Credit Cards
This is another kind of debt financing option. If you haven’t started your e-commerce business yet and you are just planning to launch then banks might not give you loan as it will require some track record of sales to gauge if you will be able to repay your loans or not, in such cases credit cards are useful.
As soon as you register your business as a Pvt. Ltd. Company or an LLP, many banks will approach you to open your company’s current bank account, they also offer credit cards for directors. You can apply for a business credit card, but initially, you can easily use your personal credit card as well. Apart from easy eligibility, access to capital, credit cards also have an added advantage of cash backs &reward points. And if you can use it properly, it can be a great tool for building up your credit history.
But you need to keep in mind that credit card interest rates can be a big headache, it goes up to as high as 40% which can pile up to become really huge, this is never a long-term solution but surely in short term, you can use this tool.
Pros & Cons of Credit Cards:
|Easy qualification||High-interest rates|
|Fast and convenient access||High annual fees|
|Rewards and incentives||Might affect personal credit score|
|Helps in building a credit history||Only a short-term solution|
- Line of Credit
Let’s take a hypothetical situation. You might run into a situation, with your startup, where you need Rs 1,00,000. But this expense is not required at one shot; you need it across a period of three months. Considering the lengthy process to acquire a loan, you would rather take a loan of Rs 1,00,000 at one shot rather than take three different loans. But the problem is, the bank is going to charge you interest for the entire Rs 1 lakh irrespective of how you choose to use it.
This is the inherent problem with traditional lending methods. And that’s where line of credit comes into the picture.
With a line of credit, you can apply for a loan amount and need not utilize the entire amount. You can withdraw only the amount you need and keep the rest in the bank. The best part is that interest will be charged only on the amount used and not the entire amount.
In the same example, say you apply for a line of credit of Rs 1,00,000 and you utilize only 30,000 out of it. You will be charged interest only on the Rs 30,000 and the rest Rs 70,000 will be available when you need. This means you will save a lot on interests.
There are plenty of traditional banks and new online players who offer this service.
Pros & Cons of Line of Credit
|Lesser interest to be paid||Temptation to spend|
|Borrow only what you need||Track record is a must|
|Constant access to funds||Higher interest rates|
Microfinance, as the name suggests, is a small credit given for a short term and is usually serviced by Non-Banking Financial Corporations (NBFCs). Microfinance is traditionally reserved for people with low income or who do not have a formal credit history or maybe do not have access to traditional loans at all.
They usually have low eligibility criteria, and a new startup business can have access to vital funds. But not all NBFCs will be open to funding business. Certain NBFCs have a particular target group and sometimes a very specific type of loan that they would serve.
The loans and interests are usually very similar to traditional banks, sometimes even higher. A few of the NBFCs also offer a lot of other unconventional services like chit reserves and advances and other banking financial services which might be useful for a startup business.
Pros & Cons of Microfinance
|Quicker processing||Higher interest rates|
|Less stringent eligibility criteria||Small loan amounts|
|Fewer rules and regulations||Not as widespread as traditional banks|
- Equity Funding
Equity funding depends on the stage of the startup business. Below are commonly known different stages of equity funding:
In order to take debt/loan, a business startup need a high level of predictability in his business so that he can repay the loans taken. In addition, there is a general tendency of people to stay away from the loans, in such cases equity funding is a good option.
You minimize your risk by sharing part ownership of the company in return for capital. This capital usually comes in the form of “venture capital”, which is money invested in companies with a huge risk but a massive potential for exponential returns. These investors, usually, are aware of the risks they are getting into, but you need to show them exponential results.
Valuation is the concept by which the worth of the business can be determined so that a part of it can be sold for the capital.
There are plenty of methods to arrive at the valuation of a company, but as a general rule, one can assume five times one’s annual revenue as the value of his/her company. For, eg, If you are making one crore in revenue, then you can assume that the value of the company is five crores. Again, this is an oversimplified way to arrive at this valuation, but this should give a sense.
If the startup business is at the ‘idea’ stage, with no operations or sales, then its valuation will usually be based on future cash flows, which ultimately depends on execution. This is why, investors typically look at the founder’s profile, background and history and honestly speaking at this stage, getting funding have become really tough these days.
Now depending on the stage of the startup business, there are various types of funding it can raise from investors.
- Seed/angel funding
This is the first leg of any startup journey. In this early stage one has an idea, one probably has a co-founder, and one has gone ahead and built a prototype. One has invested one’s own money, probably a few of friends and family have helped fund the idea. But this is just enough to sustain him and his co-founder for a bit.
Usually, the first round of funding is called the seed funding, and it often happens at the idea/prototype stage. Funds from this round are generally used to develop the product, hire key members beyond the funding team and set up the foundation for revenue generation.
At this stage, investors will be looking for signs of product-market fit (meaning does the market even need your product), some initial set of customers which probably might drive some revenue. What you should be seeking here is a validation of your idea and the potential to scale. This round is usually led by angel investors (individuals willing to invest ) who also sometimes don the role of mentors.
Average funding amount: $500,000 (Rs 3.5 crore)
Average company valuation: $1 million – $2 million (Rs 7-15 crore)
- Accelerators and incubators
Accelerators and incubators come into the picture around the same time. Accelerators and incubators tend to be organizations, usually run by investors and experts, that try to help startups achieve what they are after. Apart from funding them, they also tend to provide startups with additional help in the form of mentorship and resources.
It may be noticed that the terms “accelerator” and “incubator” are often used interchangeably, but they are not the same thing. There are a few notable differences.
Accelerators tend to help startup grow and scale an existing company ( hence the name accelerators), while incubators usually take businesses at the idea stage and seek to mould them into a viable business model.
Accelerators tend to be more like programs with a set time frame, where startups work with a bunch of mentors and other startups, to iron out things and set the foundation for scale. If one were to apply for an accelerator program, one might be given a small investment and most importantly, access to an extensive mentor network in exchange for equity.
Unlike accelerators, incubators tend to come before accelerators at a much early stage and can also be industry focused. They can offer you office space, help you evolve from the idea stage to the prototype stage, try to get a product-market fit, mentor you to grow from there. Again they usually take a small chunk of your equity in return for their services.
It is necessary to keep in mind that accelerators and incubators can be incredibly hard to get into. Less than two percent of the applicants go through. Even if one gets in, he/she might be asked to relocate, even if it’s for a short period of time.
Average funding amount: $500,000 (Rs 3.5 crore)
Average company valuation: $1 million – $2 million (Rs 7-15 crore)
- Series A Funding
Unlike accelerators, incubators tend to come before accelerators at a much early stage and can also be industry-focused. They can offer you office space, help you evolve from the idea stage to the prototype stage, try to get a product-market fit, mentor you to grow from there. Again they usually take a small chunk of your equity in return for their services.
It has to be kept in mind that accelerators and incubators can be incredibly hard to get into. Less than two percent of the applicants go through. Even if one gets in, one might be asked to relocate, even if it’s for a short period of time.
Average funding amount: $5 million (Rs 35 crore)
Average company valuation: $10 million – $20 million ( Rs 70 crore – Rs 150 crore)
- Series B Funding
After successful completion of Level A, comes the next level of growth: scale. This is where one will be judged on how he can take whatever he has done so far and take it to the next level. If one is doing X, how can he take it to 10X? A Series B investment usually fuels this kind of growth. This is where the rubber meets the road.
This level of capital infusion will allow startup to make expansive ( and sometimes expensive ) hires across the board, grow both deep and wide in the market with new product segments and multiple revenue streams, and sometimes even buy smaller startups that might put startup in strategic advantage.
Average funding amount: $20 million (Rs 140 crore)
Average company valuation: $40 million – $60 million (Rs 300 crore – Rs 450 crore)
- Series C & Above
The achievement of Level A & B by startup business is a significant step. The whole industry is now watching these giant strides and capture more market size on an everyday basis. Competitors are losing ground; as one has a strong & established the brand in the market. Very few startups reach this stage of funding, but at this stage, the risk is much less, one has established oneself in the market, and that sense of the unknown has long disappeared.
At this stage one gets confident about one’s startup, the industry one is operating in, and this allows one to go even bigger and raise massive rounds of investment in the form of Series C and above. In essence, one can keep continuing to raise money in the form of Series D, E, F etc. but this privilege is reserved to only breakout companies.
At this stage, one will probably be eyeing new markets, even international if one is ambitious enough. The startup business takes branding to a whole new level by sponsoring IPL matches and product placements in the famous Bollywood movies. One enters into strategic partnerships with other companies to further disrupt the industry. One acquires other companies and grow deeper and broader into his market. One would also be looking at making one’s business profitable to prepare for the next big thing:
Average funding amount: $50 million (Rs 350 crore)
Average company valuation: $200 million – $300 million (Rs 1,500 crore – Rs 2,000 crore)
- IPO – Initial Public Offering
The Initial Public Offering is the first time the startup business will be offering the shares of his/her private limited company to the public. So far, one was attracting only institutional investors, but now one goes to the public. Now the public can buy and sell one’s shares at a price determined by the demand and supply of one’s shares in the share market.
There are approximately 5000 companies, among millions of companies, listed in India’s stock exchanges, which means two things :
- It’s complicated to file for an IPO with lots of documentation and regulation
- One has reached an elite stage where one’s startup is no longer a startup.
This is also where one’s investors “exit” from your business. They take this opportunity to sell the equity they have in your company and take the money. Usually, at this stage, they tend to get exponential returns on the investments they have made in your company.
An alternative to this is to sell the startup company to another bigger company. This is also one form of exit and a lot of companies take this route rather than the IPO since it may attract a lot of attention and regulators to the successful startup business. In both cases, both he and his investors can exit from the business and reap the benefits of his hard work and success.
How long does it take to raise Equity funding?
To answer this one needs to understand the startup funding processes which are shown in the below figure:
Assuming that you have identified the investors you want to work with, be it angel investors or VC firms, and they agreed to a meeting, you need to pitch your idea and business. The details is as follows.
Sign off Term Sheet ( TS )
The Term Sheet is a list of terms that both you and your investor would have mutually negotiated and agreed upon. The terms usually include how much you will be getting and will you be getting it in one shot or in tranches (parts) and other conditions. This is not set in stone and usually, have an “expiry date”.
When investor is willing to invest a lot of money, they would like to ensure that the deal is real. The investors carry out rigorous financial and legal due diligence before they move on to the next step.
Shareholders agreement (SHA)
If everything checks out during due diligence, the investors would like to protect their rights as shareholders. This is usually very detailed and covers a spectrum of details to protect all the shareholders (including oneself) from any disputes arising in the future.
Money hits the bank
After the SHA is signed off, one can expect the money to hit one’s bank very shortly. He will also be required to make necessary filings in the Registrar of Companies (RoC) and stay compliant throughout. The entire process might take 3-6 months.
The internet is, indeed, the ultimate equalizer. If nothing, the internet has closed the gap between the business, and its customers by eliminating middlemen. There was also a factor of trust which has also been solved to a large extent by various services. Forget about the behavioral change from traditional shopping to online shopping; people are now buying online before the product is even released!
That’s precisely the concept of crowdfunding. Crowdfunding is the polar opposite of the traditional business route. Ideally, one would first build a product, get some traction, raise some money, get more customers, and grow from there.
With crowdfunding, usually people “pre-order” startup product before one has even started building it, that way one can use the money from one’s “sales” to actually create the product and ship it to their customers.
So, in essence, with crowdfunding, one can get a small amount of money from a lot of people instead of a lot of money from a limited number of people. One can also choose to part with equity if one would like to or else can purely base it on pre-order. Crowdfunding has been hugely successful in raising donations for various causes.
To get startup project crowdfunded, one need to first work on a detailed business plan. One need to then set goals, milestones (very important), timelines, and how one will execute and deliver. Also, one need to mention how they are going to deploy the funds. A prototype, even in a design form, would be helpful in describing their product to their audience.
Once startup entrepreneurs have all of this, they can go to one of the crowdfunding platforms like Wishberry, Indiegogo, Ketto, and more. It can be extremely competitive to raise money on these platforms.
Pros & cons of crowdfunding
|Low Risk||Risk of the idea being stolen|
|Parting with equity is optional||Low flexibility in product dev|
|Larger investment pool||Might not work for B2B|
|Product-Market fit validation||High pressure on delivery|
- Government Funding
Of late, the Government of India has been focusing on startup bandwagon, and this is good news for all Indian entrepreneurs. To the government’s credit, there are enough programs, and the most notable of them is the Startup India program.
Startup India intends to create a conducive environment for startups to thrive in India by setting up incubation centers, relaxed norms, tax exemptions for three years, and most importantly, an Rs 10,000 crore corpus fund managed by Small Industries Development Bank Of India (SIDBI). The government has received a lot of flak for poor execution of the program, but nevertheless, there is some traction for this program, and the ecosystem as a whole seems to have benefitted from it.
Also, another program that cannot be ignored is the Pradhan Mantri MUDRA Yojana (PMMY), which seeks to facilitate loans of up to Rs 10 lakh to non-corporates, and non-farm small/micro-enterprises. These loans are serviced by most commercial banks and also NBFCs, and you can approach any of these financial institutions or even apply online through their portal.
Also, you might want to check with your own state governments. Although most State governments fall under the purview of the programs mentioned above, States have their own programs and initiatives too. Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, and Rajasthan Startup Fest are good examples of these state-run programs.
Pros & Cons of Government Funding:
|Lesser pressure||Can take a long time|
|Money attracts money||Tedious process|
|Access to govt resources||Highly unreliable|
|Relaxed norms||Not easy to obtain|
- Revenue capital
This type of funding is relatively new. Unlike other forms of finance, this model is specifically built for sales-driven online businesses, like e-commerce and SaaS. It’s called revenue capital because the funding, plus a fee, is paid back directly via a revenue share agreement.
The idea is that one gets money upfront to put into sales growth drivers like online ads or inventory. Then rather than paying back the capital with loan repayments, one can simply give up a share of one’s (boosted) sales until the money’s repaid.
Without the capital, one would keep 100% of the sales revenue. But with some revenue capital, while one might give up 10% as one repays, their total sales should be much higher with the extra funds one can invest: hence it is a slightly smaller slice of a much bigger pie.
One don’t give up any control, any equity or have any uncertainty on how much you’ll pay back. If you make fewer sales for one month, you repay less that month. If you make more, you repay more. But the total to repay never changes, only the time you take to do it changes.
It is the right funding for those who want thrust to put into stock or ads. This is the perfect method for any cash-flow positive e-commerce business.
A great example of an e-commerce business that uses revenue finance is 304, a D2C fashion brand. We at Outfund actually funded 304 and they’re one of our best investments. It’s still early days but we can’t wait to help them go to the next level and beyond!
Pros& Cons of Revenue Capital:
- Full control of your business
- Pay back as you earn
- Flat fee – you know how much you’ll repay and will never pay any extra
- Flexible repayments
- Fast, easy applications
- Can combine with other forms of funding like VC
- No personal guarantee or risk to your own assets
- Have to be revenue positive and not too early stage
- Usually have to invest directly into growth, rather than working capital
- Have to show you can grow sales with investment