The small business financing landscape has changed significantly since 2020. The options available to businesses with $1-10 million in revenue today would have been inaccessible or unaffordable five years ago.
The small business financing landscape has changed significantly since 2020. The options available to businesses with $1-10 million in revenue today would have been inaccessible or unaffordable five years ago.
Revenue-Based Financing
Revenue-based financing — in which a business receives capital in exchange for a percentage of future revenue until a multiple of the original amount is repaid — has matured into a legitimate financing tool for businesses with predictable recurring revenue. For SaaS businesses, e-commerce companies, and subscription-based service providers, RBF offers capital without equity dilution, without the personal guarantees required by traditional bank loans, and with repayment that automatically adjusts to business performance. The effective cost is higher than traditional debt, but for businesses with high-margin, recurring revenue, the trade-off is often favorable.
The SBA Loan Opportunity
SBA loans remain the most underutilized financing option for small businesses. The SBA 7(a) program provides loans up to $5 million at rates that are regulated and competitive, with amortization periods up to 25 years for real estate and 10 years for working capital. The application process is more intensive than alternative lenders, but for businesses that qualify, the terms are dramatically better. A business borrowing $1 million at 7% over 10 years via an SBA loan versus 24% over 18 months via an alternative lender saves approximately $140,000 in interest — capital that compounds inside the business rather than enriching a lender.
