Frequently Asked Questions
Get answers to the most commonly asked questions.
WHAT IS THE DIFFERENCE BETWEEN A LIGHTER TERM LOAN VS. A LIGHTER REVENUE-BASED LOAN?
A Lighter Term Loan provides startups with a greater degree of downside protection via a higher probability of payment default if the business is having operational issues. The repayment of the Lighter Term Loan is a fixed monthly payment with a relatively fixed cost of funds—allowing you to better manage operational costs while pushing for growth.
In comparison, a Lighter Revenue-Based Loan gives borrowers more flexibility with variable monthly payments based on monthly net cash receipts—adjusting for the ups and downs of your company’s performance.
HOW DO I QUALIFY FOR THE LIGHTER TERM LOAN?
The minimum qualifications we look for include:
Tech companies (Software, SaaS, tech services, etc.)
Monthly recurring revenue (MRR) is an average minimum of $15,000
Based in the U.S. or a subsidiary in the U.S.
WHAT IS A FORWARD COMMITMENT?
A Lighter forward commitment is a pre-approved commitment by Lighter to provide an additional amount of funding to a company in the future. If you are interested in a forward commitment, the Lighter team will assess this during the application process for the Lighter Term Loan.
WHAT IS THE LIGHTER TERM LOAN?
A Lighter Term Loan is a non-dilutive alternative for startups looking to quickly access up to $1M in growth funding. The Lighter Term Loan is structured as a standard loan with fixed monthly payment amounts that is paid back over a predetermined time frame consisting of a fixed monthly principal amount plus all interest that was earned on the existing loan balance the prior month.
During the application process, we will determine if you also qualify for a forward commitment in addition to a Lighter Term Loan, giving you immediate access to additional capital in the future without having to reapply.
WHAT DO I GET BESIDES JUST THE MONEY? HOW DOES LIGHTER CAPITAL ADD VALUE?
Lighter Capital’s team has many years of experience funding and scaling startups. Many of our clients who have gone on to raise venture funding made their first connections at VC firms through the Lighter Capital leadership team. If you have a question or problem, chances are someone in the Lighter Capital community has been there before and can help you. Both our team and our community are very supportive, and will help you in any way we can.
WHAT HAPPENS IF MY COMPANY GETS ACQUIRED?
First, we congratulate you on your hard work paying off! Second, you as a borrower would have a repayment commitment to uphold, which in the case of an acquisition can be done by “buying us out” of the remaining debt.
WILL SEEING REVENUE-BASED FINANCING IN MY COMPANY'S FUNDING HISTORY MAKE VCS NERVOUS?
No. Angels and VCs tend to respond positively to revenue-based financing. It gives your company more leverage without diluting equity, which future investors like for two reasons
It makes the pie bigger for them.
Having fewer early-stage investors means there’s more pie to go around.
There’s also no valuation event, which helps keep things simple.
Many of our clients have used our funding to scale their companies and earn better term sheets from prospective investors, and many of our clients have gone on to raise VC funding.
SO I CAN PAY BACK THE LOAN EARLY?
While you may pay back your loan (plus return cap) at any time, there is generally no incentive for paying back the loan early. We may make an exception if you expect a special event (a VC round, for example) within the first year.
DO I KEEP PAYING THIS PERCENTAGE OF TOPLINE REVENUE FOREVER?
No. Payments stop when the return cap has been paid back. RevenueLoans® are normally repaid over 3–5 years, but if your revenue grows faster than expected, you can pay off the loan sooner.
IF IT’S A REVENUE LOAN, THEN WHAT’S THE INTEREST RATE?
Unlike a traditional loan, revenue-based financing doesn’t have a set payment amount each month. Instead, you pay a percentage of topline revenue. If you beat your plan and grow faster, your payments go up accordingly, but if you miss your plan, your monthly payment goes down.
WHAT DO I OWE IN RETURN?
We will ask for a percentage of revenue (usually between 2% and 8%, never more than 10%) until the total repayment cap is reached. Generally, this is calculated and debited monthly via Automated Clearing House.
IS REVENUE-BASED FINANCING JUST A FANCY WAY TO SAY “FACTORING” OR “RECEIVABLES FINANCING”?
No. Lighter Capital provides revenue-based financing, which means we give you unrestricted capital for growth in return for a small percentage of monthly revenues. “Factors” or “receivables financiers” basically speed up the cash flow from sales that already happened (or are just about to happen). Factoring provides working capital; revenue-based financing is growth capital. It comes with fewer restrictions and impositions on your workflow, and is paid monthly compared to daily or weekly, as with factoring.