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EdTech Business

5 Reasons to choose Revenue Based Financing for your EdTech Business

With a market size in excess of $800 mn, India’s edtech sector is projected to be a $10+ bn industry by 2025! As we speak, the edtech environment in India is changing as innovative business models emerge regularly. Edtech funding is undergoing fresh additions and adjustments to keep up with the rate of innovation.

Revenue Based Financing (RBF), is a novel financial solution that enables firms to get capital without giving up any equity, is one such model that is making waves right now. By 2027, it is anticipated that the RBF market would have grown to more than $42 billion.

Many young, digitally-run enterprises that are not on the radar of venture capitalists or private equity firms for funding tend to choose the Revenue Based Financing since it requires no collateral. These entrepreneurs looking to get fund for eductech business or any industry for that matter, assert that Revenue Based Financing can aid companies in surviving situations like pandemics, funding winter and that they provide a simple, paperless digital onboarding procedure and speedy fund distribution (within 48 hours).

Additionally, offline, asset-intensive firms in India have been supported by traditional lending while Internet enterprises lack tangible assets. At present, the traditional financial institutions are wary of lending to asset light business models.

Companies looking for edtech funding do have a lot of financial data that can be leveraged for flexible fundraising. The RBF model can use historical data to make efficient underwriting choices to help such growing businesses.

To get funds for business, many entrepreneurs are looking at RBF because it offers several benefits to all kinds of businesses, including D2C, e-commerce marketplace, SaaS, etc. Its 5 major benefits over other forms of lending are:

  1. Fast - As compared to the long procedures associated with both business loans and raising equity-led venture capital, RBF rounds by Klub can be processed in time as low as 48 hours.
  2. Fair - Without any tedious pitching and investor appeasement, founders can raise funding for their business by only sharing their data.
  3. Flexible - Unlike traditional capital where businesses need to pay a fixed EMI each month, RBF offers founders the flexibility to pay back loans as a percentage of their monthly sales. Essentially you pay less during lean months and more during high growth months, ultimately paying it off sooner than the whole tenure.
  4. Founder friendly - Funding usually comes with its share of equity dilution and founders lose a stake in their business for capital. This is not the case with RBF because we do not take any equity against the funds brands raise with us.
  5. Frequent - Businesses that raise RBF repay it before their total tenure such that more than 70% of these businesses raise repeat rounds in just 45 days after their first round.

Looking to raise capital for Edtech business?