It's now easier than ever to establish your brand mostly online. Building a brand is made easier by a strong ecosystem of channels for...
It's now
easier than ever to establish your brand mostly online. Building a brand is
made easier by a strong ecosystem of channels for marketing, distribution, and
commerce.
With
products in a variety of categories, Amazon is today the largest marketplace in
the world. We have witnessed a significant number of these brands take off on
e-commerce platforms such as Amazon, coinciding with the rise in new brand
formation in India's consumer brand market. Amazon India added 1.5 lakh new
sellers to their platform in 2020 alone!
However, a
brand needs expansion money to really take off. a notion that, due to the high
costs and lengthy application processes associated with traditional stock and
debt, very few enterprises have yet to fully embrace. There is still a
significant funding vacuum even though supporting companies in the ecosystem
have quickly changed to meet the needs of consumer brands in this new era.
While banks
need to see profitability and go through their never-ending checklists, equity
investors need to assess your ability to return 10x–20x of their investment.
Enter now: Financing Based on Revenue! A straightforward one-time flat
financing fee, without any EMIs, and nondilutive to boost your brand!
Combining
the best aspects of debt and equity financing is the RBF concept. Key
characteristics of RBF include:
· Growth finance based on a proportion
of sales with repayments. Revenue-based financing allows a business to give
capital to an investor in exchange for a predetermined part of future revenues.
· No individual promises are made
· With a 48-hour turnaround time from
data submission to soft sanction, this process is swift and data-driven.
· Absence of equity dilution
RBF
financing has helped brands in a variety of Indian and global industries
develop, and an increasing number of companies are choosing to use this
financing strategy. The global revenue-based financing market is expected to
reach $42 billion by 2027, rising at a CAGR of 61.8% from 2020 to 2027, due to
the proliferation of e-commerce, D2C, and social commerce companies!
When it
comes to brands, RBF is a great enabler of expansion. Because of their high
levels of trust, customer-first philosophy, and exceptional convenience,
consumers are increasingly gravitating toward online marketplaces like Amazon,
which provide new brands with the quickest path to mass market adoption.
What are the
many business models used by Amazon sellers, and how does RBF fit into them?
Regarding
funding, Amazon brands fall into two categories:
1.
Companies that are able to raise funds to build inventory and manage working
capital
Products and
brands must be able to recognize the customers they want to sell to and adjust
their offerings and customer experience to suit their needs when consumers
shift from "searching" to "choosing." Given the difficulty
of monopolizing consumer discretionary products, it is crucial to never run out
of stock!
Expanding
production capacity and inventory benefits D2C brands, private labels, and
distributors. Inventory finance becomes a wonderful fit for RBF because these
are cyclical expenses with a high return on investment that is evident in the
revenues. Raising RBF for inventory financing gives you the flexibility to
concentrate on your brand's strategic expansion.
2.
Companies that are able to raise money for advertising
A component
of any eCommerce marketing plan should involve advertising. Using an
advertising plan to engage with your customers is crucial as the industry
becomes more and more competitive. It's imperative to try out various ad types,
targeting possibilities, and brand-specific chances.
Increased
spending on advertising to drive traffic and sales is essential to revenues.
For a seller, Amazon advertising might be the most effective sales tactic when
executed properly. Since capital may be raised for a certain time period, which
immediately effects revenues, RBF fits ideally into this use case.
Therefore,
how can you tell if your company is ready to raise money through RBF?
You should
use RBF if:
· You have good gross margins due to
your superior unit economics.
· Your income is consistent with
occasional seasonal variations. [Aside: Klub provides two options depending on
your capital requirements & revenue. The monthly earnings threshold for the
plans is as low as Rs. 5 lakhs.
· Your cash flows are being burdened by
bank EMIs.
· Capital is required for ongoing
expenses like as marketing, inventory, and capital expenditures that will fund
revenue-generating activities.
As long as
your revenues are steady, if not increasing, you can raise Klub's RBF at any
point in your company's development. RBF may be used to achieve quick expansion
for any size company, regardless of how many investors are on your cap table or
how small you are and how you raised money. RBF is frequently used by
businesses for the following:
· Spending on marketing and advertising
· Growth of inventory
· Taking care of working capital
· Expansion into new markets
· Spending on capital projects
These are
the typical use cases for enterprises, but the flexible financing alternatives
offered by emerging players in the RBF area are a great feature. They were
founded to support consumer brands in scaling with extremely flexible finance,
and they are currently assisting more Indian brands in reaching daily goals.
Klub plans to fund more than 350 consumer products in 2021 alone, spanning a
wide range of sectors such as FMCG, fashion & leisure, and health &
fitness. There has never been a better moment for an Indian consumer brand
seeking to raise funds for expansion.
Read More:
The Best Amazon Inventory Control Tools for Your Online Store
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