California Partnered With a Revenue Based Financing Provider

On the California Small Business Loan Match website operated by The California Infrastructure and Economic Development Bank (IBank), is a list of vetted partner small business lenders that the state guarantees loans for. One of those lenders is AltCap California which actually offers revenue based financing.

At face value, AltCap describes the cost of its revenue based financing as having to pay up to 7.5% of monthly revenue with a total cost of 1.4x to 1.5x. Its multi-part video education series describes revenue based financing costs as working in the following way:

Repayment Cap: Multiple of the total loan amount used to calculate the set dollar amount to be repaid. (Total Cost of Capital)

Repayment Rate: Share of revenue taken to repay the loan. (Holdback %)

In its Case Study example of Juice Boost (the 2nd video), it explains that the metrics used to calculate the cost of Revenue Based Financing are the Repayment Cap (factor rate) and Repayment Rate (holdback %).

In its final video, the 4th video, it tells borrowers to inquire about APRs to make comparisons against companies like Square, Amazon, Stripe, and Shopify.

“Revenue-Based Financing allows small businesses to raise funds by pledging a percentage of future, ongoing revenues in exchange for capital provided by a lender,” the website says. “Revenue-Based Financing is different than debt financing. Interest is not paid on an outstanding loan balance and there are no fixed payments. Instead, payments are proportional to a firm’s performance, offering a flexible, patient source of financing.”