Revenue-Based Financing -
A type of funding in which a company agrees to share a percentage of future revenue in exchange for capital up front. The loan payments are tied to monthly revenue, going up for strong-revenue months and down for low-revenue months.
Revenue-based financing is debt financing with a twist. While revenue-based or royalty financing seems a relatively new financing model, it has been a successful investment model for decades in mining, intellectual property, movies, music and other industries. Speculators who invested in oil, gas or mineral extraction companies, received a percentage of earnings in exchange from successful operations.
It is a loan with a promissory note where repayment of the loan is tied to a percentage of the company’s revenue. Instead of repayment being measured in a fixed interest percentage of the loan amount, the return amount is negotiated and that amount is paid through the agreed-upon percentage of revenue. Its flexibility makes it an ideal vehicle for deploying mid-sized loans through an investment fund.
Encipient provides capital to fuel the growth of businesses in a variety of scenarios:
- As a bridge to a future equity round, likely at a higher valuation
- As a bridge to a future sale of the business, allowing to preserve ownership and financial value
- As acquisition capital to finance the cash component of a transaction
- Or simply as growth capital for the business owner who desires funding that does not require giving up substantial equity and control
Because it is structured as highly flexible debt, revenue-based financing from Encipient™ preserves a company’s equity. It is an ideal source of capital for bridging to a future equity round that will likely be at a higher valuation. Or, for the business owner who wants to keep his or her company closely held, our capital is a practical, attractive financing alternative that does not require a liquidity event for success.
Encipient™ structures each investment as flexible, long-term debt with the following entrepreneur-friendly features:
- no fixed loan term
- no minimum payment requirements
- no balloon or lump sum payments
- no restrictive conditions
- no personal guarantees
- up to $5,000,000 in growth capital available in customized tranches
Encipient™ provides revenue-based financing which offers a variety of benefits:
- Preserves equity because it is structured as debt
- Friendly to the business’ cash flow due to its adaptive payment structure
- Provides fuel for growth without the constraints of traditional debt
- Aligns entrepreneur and investor interests as it does not require a liquidity event for success
- Preserves control for the business owner who wants to keep his or her company closely held; a board seat may be required.
- Provides the flexibility to take the capital that the business needs when it needs it; Encipient builds in additional tranches, if needed.
- Gain an experienced team of entrepreneurs and operating executives who understand the cannabis industry, providing access to useful advice and assistance, industry contacts and other useful resources.
Encipient™ creates an opportunity for investors to invest in a single source and gain the significant upside potential of investing in revenue-generating, high-margin growth companies. Risk is mitigated through this diversification and the added value created by our experienced management team. Encipient™ offers unique investment opportunities for investors with the following advantages: