What is private credit and where does the money come from?
Private credit is financing from providers outside traditional banks. Providers may raise capital from private investors, often through private funds or other investment vehicles. Banks typically fund lending through deposits and borrowing.
Why would a business use private credit instead of a bank?
Banks and nonbank lenders may evaluate a business differently. Banks may ask for more documentation and take longer to decide. Some nonbank lenders may focus more on recent revenue, cash flow, or assets and may move faster. Costs vary, so make sure the payments fit the business’s cash flow.
Which financing options do you offer?
Term loan: A set amount repaid over an agreed period, with interest. Useful for a larger expense or investment.
Lines of credit: Borrow up to a set limit, repay, and borrow again as needed. Useful for recurring short-term cash needs.
Equipment financing: Financing for equipment, often secured by the equipment itself. Useful for a purchase or replacement.
Revenue-based financing (RBF): Upfront funding in exchange for a share or set amount of future customer payments, or receivables. Fits businesses with steady sales. Terms vary by contract.
How does revenue-based financing work?
A funder provides capital to a business upfront in exchange for a share or agreed amount of future sales. Payments to the funder may vary with sales or a set schedule, with adjustments defined in the agreement.
A simple example of RBF
A business gets $100,000 now, and the provider is set to collect $120,000 from future sales under the agreement. The 1.20 factor rate is the multiplier: $100,000 × 1.20 = $120,000. The $20,000 difference is the stated cost before any extra fees.
A 1.20 factor rate isn’t the same as a 20% annual interest rate or APR. It also doesn’t tell you how long repayment will take. Two offers with the same factor rate can still have different total costs and put different pressure on cash flow, depending on their fees, payment schedules, and other terms.
What should a bookkeeper, accountant, or owner compare?
Don’t stop at the advertised rate. Look at the full deal: how much money the business gets, how much it will pay or turn over from future sales, and how repayments will affect day-to-day cash flow.
Before agreeing, check:
1. How much cash will the business actually receive.
2. How often are the payments due and for how much.
3. How does reconciliation work, or how can you adjust payments and under what conditions.
4. Are there early payoff discounts?
How we work
Promised Land Funding is a brokerage, not a bank or direct lender. We help business owners understand their needs, compare potential offers, and arrange financing when an option makes sense. PLF’s compensation is included in the financing agreement you sign. You do not pay PLF a separate fee.
Our process
1. Talk: We start with a conversation about the business, the use of funds, timing, and existing obligations.
2. Securely share information: The owner completes a short application and provides the financial information relevant to the financing request.
3. Review options: We evaluate appropriate offers and walk through cost, payment structure, and trade-offs. We may also coordinate with the owner’s
bookkeeper or accountant.
4. Decide: The owner chooses whether to proceed. If they accept an offer, the financing provider handles final documentation and funding, subject to its approval and closing requirements.
Want to discuss this in more detail?
Whether you are a business owner or an advisor evaluating options for a client, we are happy to talk through your situation.