On April 4th, Boast Capital hosted a webinar featuring their CEO, Lloyed Lobo, and Lighter Capital CEO BJ Lackland. They discussed how entrepreneurs can skip a round of VC funding—thus preserving equity and ownership—using two methods of alternative financing.
Q&A about revenue-based financing and R&D tax credits
Q: Does Lighter Capital fund companies outside of the United States?
We can fund entities based outside of the US provided they have a US-based subsidary and assets in the US (including customers or senior staff). Essentially, if you have a significant presence in the US, we can fund your US entity.
Q: Do you take a board seat?
Neither Boast Capital nor Lighter Capital takes a board seat. “We’re here to help if you want help,” BJ Lackland says, “but we don’t really want to look over your shoulder.”
Q: When’s the best time to talk to Lighter Capital?
We fund companies with a minimum of $15K in monthly recurring revenue. On average, companies we fund have about $2M in revenue. We loan up to 1/3 of a company’s annual revenue.
Q: Can you claim subcontractors through the R&D tax credit when working with Boast Capital?
Yes, you can claim up to 65% of a subcontractor’s invoice amount, provided they’re in the US. You can’t claim offshore subcontractors or any R&D done outside of the United States. If you’re using the Canadian tax program, similar criteria apply.
Q: For revenue-based financing, what is the application process?
Our typical process is a combination of secure online forms and phone calls with our investment and underwriting team. It usually takes between four and six weeks, but the actual time an entrepreneur spends filling out paperwork or talking on the phone is much less—generally about 2 hours.
Q: If you’re in the process of filing your taxes, can you still work with Boast Capital to claim R&D tax credits?
If you’re already in the process of filing and want to take advantage of the R&D tax credits, Boast Capital recommends you file an extension. This will give you the extra time you need to make sure you’re taking full advantage of the credit.
Q: What is Lighter Capital’s typical multiple they want back when funding?
It depends. Our financing can be paid back over a three, four, or five year period. For a three-year loan, the multiple will be around 1.4 or 1.5. For a 5-year loan, the multiple will be higher. Some companies prefer the loan with the higher multiple because the monthly payment will be lower.
Often when we’re talking to a company, we’ll give them two proposals: a short-term loan with a low multiple but high royalty rate, and a long-term loan with a higher multiple but a lower royalty rate.