Revenue-based financing gives a business a sum now and takes a fixed percentage of its monthly revenue until an agreed cap is paid. A Carrollton, GA grocer could use it for a cooler or a stock buy, but it should be compared in dollars with a term loan and a card-sales advance first.
This Maplepeak Finance post, from Carrollton, Georgia, explains revenue-based financing for Carroll County grocers and convenience stores and compares it, with invented figures, with a term loan and a merchant cash advance for the same cooler.
What Is Revenue Based Lending? What Carroll County, GA Grocers Should Weigh
Revenue-based lending pays a sum up front; in return the business pays a set share of revenue each month until it has paid a fixed multiple of the sum, the cap. When sales are high, the payment is higher and the cap is reached sooner; when sales fall, the payment falls. There is often no fixed term, so the true cost depends on how fast the cap is reached.
Revenue-based offers can be made to stores as well as to other kinds of business. The key number is the cap: it is the total cost, whatever the monthly share.
Grocery stores counted 44 employers in Carroll County, GA in 2023, including 23 convenience stores, with a $31.2 million annual payroll (CBP). See grocery store loans.
Revenue Based Financing for Small Business in Carrollton, GA: Paying for Supplier Terms
A grocer might use revenue-based financing to stretch supplier terms: pay a distributor early for a discount, then pay the financing back from sales. That only makes sense if the discount is worth more than the financing costs. Supplier terms themselves, net 15 or net 30, can be cheaper if the supplier offers them.
A distributor's early-payment discount can be checked with simple arithmetic: compare the dollars saved with the dollars the financing costs over the same period. If the financing costs more, skip the discount.
See inventory financing and business lines of credit for the alternatives.
Register Tapes, Card Statements and Supplier Invoices a Carroll County, GA Grocer Pulls Together
- Monthly sales reports or register summaries for the past year.
- Card processing statements, if a card advance is being compared.
- Business bank statements.
- Supplier invoices and terms.
- The cooler or equipment quote, if the money is for equipment.
If the store sells fuel, separate fuel and in-store sales in the reports. Offers may treat them differently, and fuel revenue swings with prices.
Revenue-based offers are built on monthly revenue, so twelve months of sales give a fairer picture than a single strong month.
Questions Carrollton, GA Grocers Ask Before Signing
- What share of revenue will be taken, and how is revenue defined?
- What is the cap, the total to be paid?
- Is there a minimum payment in slow months?
- Can it be paid off early, and does early payment reduce the cap?
- What happens if the store is sold?
Get every answer in writing. A revenue-share agreement can define revenue broadly, and the definition changes how much is taken each month.
A merchant cash advance is a different product: it is not a loan, and a provider collects a share of card batches. The merchant cash advance page explains it.
Revenue Share, Card Advance or Term Loan: The Same Cooler Funded Three Ways (Invented)
Illustration only, invented figures: a grocer needs a $24,000 cooler. Revenue-based financing at 6% of $95,000 monthly revenue, with a cap of 1.35 times, takes $5,700 a month until $32,400 is paid, about 5.7 months (our arithmetic).
A merchant cash advance with a factor of 1.38 would collect $33,120, at a 9% holdback on $15,500 of weekly card sales, $1,395 a week, over about 24 weeks (our arithmetic).
The three options also differ in what they leave untouched. A term loan leaves card batches and monthly revenue alone; the advance takes from card sales; the revenue share takes from all revenue. Choose with the store's cash rhythm in mind.
A term loan over 36 months at an invented annual rate of 10.5% costs about $780 a month, about $28,082 in total (our arithmetic). In this invented case the loan costs the least in dollars but takes longest, and the card advance takes the most cash in a typical month, about $6,040 at 4.33 weeks a month against $5,700 for the revenue share (our arithmetic). Real offers differ. See equipment financing for coolers.
How Thin Weeks Change What a Revenue-Share Offer Costs
In a slower month, the revenue-share payment falls. With invented revenue of $76,000 instead of $95,000, the 6% share is $4,560, not $5,700 (our arithmetic). The cap stays the same, so a run of slower months stretches the time to pay it and leaves the total unchanged.
Convenience stores, counted within the county's grocery stores, had 63 paid employees across 23 employers in 2023 (CBP), under three each on average by our arithmetic, so a monthly revenue share is felt quickly in a slow month.
That flexibility is the main appeal. The cost is the cap, which is fixed whatever happens. Grocers with fuel sales should ask whether fuel revenue counts; see gas station loans. Census tables for Carroll County are collected on the Carrollton, GA page.
By Maplepeak Finance · Updated
