PremiumBENGALURU : Bengaluru: Digital lender to small and medium enterprises, KredX, said it will disburse Rs1,000 crore in credit this fiscal through its revenue-based financing (RBF) product, with a focus on consumer brands and software-as-a-service (SaaS) businesses through its network of lenders.
Over the past two years, KredX has been disbursing loans to several brands, selling on e-commerce platforms such as Flipkart, Amazon and Myntra, through its revenue-based financing product.
Through the RBF product, lenders inject a certain amount of funding into the business, and in exchange get a percentage of the gross revenues for an agreed period of time. Normally, equated monthly installments (EMIs) linked to monthly revenue go on until the initial funding amount is fully repaid, plus a multiple agreed on by both parties.
“Revenue-based financing is a cash-flow linked, zero collateral, debt capital for growing businesses which have some visibility on their revenue in the foreseeable future. It works by pledging a portion of your future revenues in exchange of upfront capital." said Anurag Jain, founder, KredX.
The RBF product works well mainly for SaaS companies which work on a subscription basis and require the client to pay monthly, quarterly or annually, the company said.
“We have helped tech companies alter their cash flow routing to be eligible for RBF, allowing them to access growth capital in less than a fortnight. Indian SaaS firms are today competing with the global players. However, flexibility of working capital and easy availability can play an important role in the growth of a firm," added Jain.
Revenue-based financing is picking up as an alternative to equity capital, with multiple startups entering the space.
Recently, revenue-based financing startup Velocity, raised a total of $10.3 million as a part of its seed funding led by US-based Valar Ventures, backed by PayPal co-founder Peter Thiel. In March Velocity claimed that over 300 online businesses have already signed up for Velocity’s revenue-based financing.
Last year, even GetVantage, which operates in the space raised $5 million in funding led by Chiratae Ventures. Earlier in January, this year, N+1 Capital, also set up its maiden fund to invest $100 million in early-stage startups through revenue-based debt financing.
Back in 2019, KredX had raised $26 million as a part of its Series-B funding from Tiger Global Management and its existing investors, including Sequoia Capital and Prime Venture Partners.
Till date, KredX has helped more than 25,000 businesses and has facilitated disbursements of more than Rs7,000 crore.
