This is an illustrative example of how this type of financing is commonly structured. It does not describe a specific client, and actual terms depend on the lender's review of your business.
The Situation
A business-software company sells annual and monthly subscriptions. Revenue is growing steadily, but customer acquisition costs are paid up front while subscription revenue arrives over the following months.
The founders want to keep investing in sales and marketing without raising another round and giving up ownership.
One way to structure a $250K working capital line
Why This Structure Fits
- Drawing only when campaigns launch keeps interest costs tied to actual use.
- Repaying as subscription revenue comes in lets the line be used again.
- Debt instead of equity keeps the founders' ownership intact.
How It Would Work
- 1
Show the revenue
Monthly recurring revenue, churn, gross margin and how long current cash lasts.
- 2
Underwriting
Lenders review financial statements, bank statements and the subscription base.
- 3
Set the limit
The limit is sized to revenue and cash flow; banks usually want profitability or strong collateral.
- 4
Draw as needed
Draw for each campaign and repay as revenue arrives.
Things to Know
- Bank lines usually need a track record; earlier-stage companies may look at revenue-based financing instead, which costs more.
- Watch covenants such as minimum cash balances or revenue tests.
- An SBA Express line of up to $500,000 is another option for eligible small businesses.