Revenue-Based Financing or Unsecured Loans Which Should You Choose

Spending too much time on financing options that don’t fit your needs can slow down your startup’s growth.  As India’s alternative lending market is projected to reach $18.24 billion by 2028, the demand for flexible, accessible funding options is growing. 

With so many choices available, it’s important to make the right one. Two popular choices are unsecured business loans and revenue-based financing, each serving different purposes.

So, how do you pick the right one for your business? In this article, we’ll break down the key differences, similarities, pros and cons between the two financing methods, helping you determine which is the best fit for your startup’s needs and growth goals. 

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What's Unsecured Business Loans?

An unsecured business loan is a type of financing where the lender does not require collateral, such as property or equipment, to secure the loan. Instead, the loan is granted based on the creditworthiness and financial health of your business.

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What do startups use Unsecured Business Loans for?

Here’s how startups commonly use them:

1. Working Capital: To cover daily operating expenses, like payroll, inventory, or unexpected costs, ensuring smooth cash flow.
2. Marketing & Customer Acquisition: To finance marketing campaigns, ads, and outreach programs to build brand awareness and attract customers.
3. Hiring Key Employees: To recruit top talent and cover salaries or training costs for crucial hires in the early stages.
4. Business Expansion: To fund growth initiatives, such as opening new locations or entering new markets, as the business scales.

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How Long Does it Take to Raise Unsecured Business Loan?

Securing an unsecured business loan is often a faster process, making it an appealing option for businesses in need of quick funding. Here's how the timeline typically works:

• Quick Processing: Unsecured business loans usually involve a straightforward application process, reducing the time required for approval.
• Fast Disbursal: Once approved, funds are often disbursed within 1-2 working days, ensuring businesses can address urgent financial needs.
• Varies by Lender: The exact timeline depends on the lender’s internal policies and the completeness of the applicant’s profile.

Are you looking for financing that scales with your business growth? At Recur Club, we specialize in providing collateral-free loans for startups and SMEs. Let’s build your success story together, talk to us today!

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What's Revenue-Based Financing (RBF)?

Revenue-based financing (RBF) provides funding in exchange for a percentage of future revenues. Repayments vary based on monthly sales, making it ideal for businesses with steady, recurring income, such as SaaS startups. Unlike traditional loans, there’s no equity dilution or personal guarantee required.

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What Do Startups Use Revenue-Based Financing For?

Here’s how they typically use it:

1. Scaling Operations: Startups use RBF to expand their operations, such as increasing staff or entering new markets.
2. Marketing & Growth: RBF funds marketing campaigns and customer acquisition with flexible repayments tied to monthly revenue.
3. Debt Refinancing: RBF can also help startups refinance high-interest debt, improving financial flexibility.

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How Long Does it Take to Raise Revenue-Based Financing?

Raising revenue-based financing offers a faster alternative to traditional bank loans, which often take months to disburse funds. With revenue-based financing, businesses can typically secure capital in just no more than 4 days, providing a timely solution for immediate funding needs.

At Recur Club, we take speed a step further, offering capital offers in as little as 24-48 hours. Our streamlined process ensures businesses can access funds quickly and efficiently. To learn more about how we can support your business, connect with our capital experts today.

Recommended Read: Understanding Revenue-Based Financing and How It Works

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Unsecured Business Loans vs. Revenue-Based Financing 

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Key Similarities

1. Flexible Use of Funds: Both options allow businesses to use the funds for a variety of needs, such as working capital, marketing, or expansion.
2. No Equity Dilution: Neither unsecured business loans nor revenue-based financing requires giving up equity or ownership in the business.
3. Short-Term Focus: Both are designed for addressing short- to medium-term financial needs rather than long-term investments.

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Key Differences

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Pros and Cons

Pros and Cons of Unsecured Business Loans

Pros and Cons of Revenue-Based Financing

Conclusion

Unsecured business loans and revenue-based financing offer distinct advantages. Unsecured loans are ideal for startups that need quick, lump-sum funding and have stable finances. Revenue-based financing, however, is better suited for businesses with recurring revenue, providing flexible repayments tied to your income.

Not sure which option fits your business best? At Recur Club, we provide tailored financing solutions through our network of 125+ marquee lenders. Whether you need unsecured business loans or RBF funding, our capital experts are here to guide you towards the right funding solution. 

Connect with us today to discover how we can help accelerate your business growth!