Why does Revenue-Based Financing appeal to e-tailers?

Why is Revenue-Based Financing the right solution for your Ecommerce business?
It's time to step on the gas of your Ecommerce business. The only problem on the horizon, and it’s not insignificant, is that to give your business a real boost, you need money.

The best way to achieve fast and large-scale results in customer acquisition is indeed to invest in online advertising campaigns. You may be convinced of their merits, but where are you going to get the money to invest in marketing? The solution exists, it's called Revenue-Based Financing, and it's becoming the preferred method of financing for e-tailers. Silvr, a pioneer in the French market, explains why.

Accelerate your Ecommerce growth through customer acquisition

How do you finance the growth of your Ecommerce operation?

What about your WCR (Working Capital Requirement)? Often hated in high school economics classes, this concept should speak to you more now that you are running a business! In Ecommerce, the initial costs of the business (inventory in particular, but also marketing) put pressure on your cash flow and increase your working capital requirements. You need to invest to boost your sales, either at the start of your business or to adapt to increased demand according to the seasonality of sales.

Acquisition campaigns, the best way to accelerate the growth of your Ecommerce business

To grow your Ecommerce business, you have two main levers: customer acquisition on the one hand and customer loyalty on the other. Here, we’ll focus on the first aspect.

How do you reach your targets and convince them to visit your Ecommerce site? Marketing makes the difference between brands. You can (you should) work on your SEO, produce content, etc., but this has long-term effects. For more direct results, paid marketing comes into play. We all know brands that offer the same products, one of which excels in advertising and the other less so... You're more likely to buy from the former!

Media campaigns allow you to reach your target audience in great numbers via Instagram, Facebook, etc. To boost your sales and get quick results, launching and optimizing acquisition campaigns is the best way. For them to be as effective as possible, you must dedicate a significant budget to them. How will you be able to finance it?

Traditional financing methods do not meet the needs of e-tailers.

Until now, there have been two main methods of financing: bank credit and raising equity. The former is difficult to obtain for Ecommerce businesses because banks prefer to finance assets and require a lot of collateral, while the latter is not relevant for all types of business, is time-consuming and expensive (dilution). Overall, you are poorly served in the financing segment.

This is now a thing of the past thanks to Revenue-Based Financing! Silvr was the first company to offer this new financing method to e-tailers in France. And many of you have already been won over by the simplicity and speed of RBF.

The advantages of Revenue-Based Financing for Ecommerce

Before we explain why RBF is so popular with e-tailers, let's start with a quick explanation.

How does Revenue-Based Financing work?

The Revenue-Based Financing, or RBF, is an innovative financing model that allows you to receive funds in 24 to 48 hours. Repayment is based on your business income. On the cost side, everything is known in advance since there is only one commission. At Silvr, it is often set between 3 and 12% of the amount financed.

The experience is much simpler than traditional methods, such as bank lending. This is made possible by connecting your accounts with the tools of the company providing the funding. In the case of acquisition campaigns, you connect your Ecommerce platform (Prestashop, for example) and your advertising accounts (Google Ads, Facebook Ads, etc.), as well as your bank accounts. Through all this data, the company has a detailed insight into the performance and growth potential of your business – and is only interested in this to make its decision!

Why is RBF a popular financing method for e-tailers?

There are many advantages of RBF for Ecommerce. We’ve already started to talk about some of the advantages, but here is the full picture:

  • Speed, both in the analysis of applications and in the receipt of funds (available within 24-48 hours).
  • Controlled cost: with RBF, there are no hidden costs. You know the overall cost of financing from the start.
  • Full control: no dilution with this method of financing, your company remains 100% yours.
  • Low risk: you don't have to provide guarantees – which can end up encroaching on your personal life – or collateral with this type of financing. You can sleep soundly at night!
  • Evolutionary drawdown: One of the innovations of the RBF is the repayment of the funds provided. With a traditional bank loan, you are charged a fixed amount on a fixed date, regardless of your activity in the past month. Revenue-Based Financing, on the other hand, adapts to your activity: your monthly payment is determined according to the revenue you brought in. No more worries!
  • Smart money: last but not least, RBF is "smart money". What we mean by this is that the company that finances your acquisition campaigns has a vested interest in making them as effective as possible. This is why we help you optimize your media campaigns, as a bonus on top of the funding. You learn best practices and your campaigns become more effective.

Revenue-Based Financing is therefore a method of financing adapted to Ecommerce, which appeals to company directors. This is especially the case for LXH, which has multiplied its revenue sixfold thanks to Silvr’s financing.

Silvr boosted LXH sales in 2020

LXH caps, made in France with style
LXH caps

LXH is a French brand of high-end caps (and now other headwear and accessories) created by Lucas Tourasse and Antoine Van Eecke. At the beginning of 2020, after gaining some traction, they wanted to accelerate their growth. How did they do that? With an advertising campaign. In order not to limit the company's growth potential and invest heavily in their digital marketing, Lucas and Antoine were looking for external financing. The banker didn't follow up with them, but we did: we met them there and then, and after studying their application, we got the ball rolling in no time!

What were the results of the Silvr financing? In terms of figures, LXH increased its revenue sixfold over one year! The acquisition campaign worked very well during the first lockdown, with a direct impact on sales volume. This gave them confidence and they quickly allocated a larger budget to their marketing to keep the trend going and help things to take off. In addition, LXH also has physical outlets. Lucas and Antoine noted a positive effect of the advertising campaigns (and therefore of the Silvr funding) on the number of visitors and purchases in the outlets in 2020.

If e-retailers were once underserved by financing, this is no longer the case. Revenue-Based Financing is being embraced by e-tailers because it matches with their business perfectly, and the experience is quick and easy. If you want to invest heavily in your digital marketing and boost your sales, we can only firmly advise that you use it.

- Published
January 23, 2023
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