How to finance the growth of your business?

Many young companies struggle to borrow the capital they need from banks. It may be too early for them, they may lack sufficient collateral, cashflow or profit, or their risk profile may be too high.

This is one of the reasons why venture capital rounds have become such a crucial concept in the world of startups. Once you’ve tried ‘friends, family and fools’, the next step is the seed stage/series A, B, C routine.

But every startup has different ambitions, capacity and financing needs.

Alongside the more common option of using venture capital to fund growth, Capital Mills offers alternative financing to help revenue-earning SaaS and internet companies achieve their growth plans.

If you’ve got a good business plan, you’re half way to securing financing. That’s because you know how much liquidity and investment you need to fulfil your plans. The next question is which financing sources you can tap into and which ones are right for you. Nowadays there are a whole range of alternative financing instruments available, often dedicated to specific sectors or companies.

Op basis van uitgebreid onderzoek hebben wij vastgesteld dat voor Saas en internet bedrijven mezzanine (tussen eigen en vreemd vermogen in) financiering een interessant alternatief kan zijn voor kapitaalrondes. Specifiek revenue-based financing is een product van Capital Mills dat bij uitstek geschikt is om in de eerste groeifasen toe te passen.

The table below compares revenue-based financing with bank financing and equity growth capital.

BANK FINANCINGRevenue Based FinancingEquity Growth Capital
TYPE OF FINANCINGBorrowed capitalMezzanine financingEquity capital
SCOPEDetermined by balance sheet, security/surety and sector. Availability to startups is limited.As a guideline: 4 x monthly recurring revenue or 40% of recurring revenue. Ideal for companies that have recurring revenue. If company grows, extra financing can become available quickly.Determined by business plan. Capital Mills offers rounds of € 500,000 to € 1,500,000.
GUARANTEESSecurity based on balance sheet. Personal surety and guarantees.No surety or personal guarantees, but security based on balance sheet (after bank financing)No surety or personal guarantees, but personal commitment
by investing, vesting,
good leaver / bad leaver.
COSTS6-12% interest, small commission.Repayment cap of 1.5 to 2.5 x principal (15-25% per year), small commission.Value of shares sold (at least 5 to 10 x money on invested capital), high initial transaction costs of up to 10% of investment.
TIME INVESTMENT FOR MANAGEMENTVery littleA few days during application, plus small amount of time during completion.Intensive during fundraising and significant during shareholding.
REPAYMENTFixed repayment schedule.Flexible repayment, percentage of revenue.Agreements on exit point and triggers in future.
ESTIMATED COMPLETION TIME2 months2 months3 to 9 months of fundraising

Capital Mills kan voorzien in Revenue-Based Financing en Equity Growth Capital. 

Find out more about these financing sources and our criteria below.

Revenue-Based Financing

Revenue-based financing (RBF) is een minder bekende maar zeer innovatieve financieringsmethode tussen traditionele schuld- en aandelenfinanciering.

We’ll provide a loan to your company in exchange for a share of your future revenue. At the outset we’ll agree clearly on the amount to be provided, the total amount repayable over time, the revenue percentage for your repayments and the frequency of payment (usually monthly).

Example calculation:

If for example you borrow €100.000 your repayments will be set at an agreed percentage of your monthly revenue. Say that your monthly revenue is €50.000 and that we have agreed that you will repay 8% of your monthly revenue each month. In that month you will repay €4.000. If your monthly revenue rises to €80.000 then you will repay €6.400. This will continue until the agreed amount has been repaid.

  • Recurring Revenue

    Software, SaaS, tech services, digital media or similar.

  • Funding when you need it

    You don’t need to borrow the whole amount in one go. We can also lend you extra capital as you grow.

  • How much can you borrow?

    We can lend you up to 4x MRR or 40% of revenue per company.

  • Location

    Your company must be based in the Netherlands or Belgium.

  • Growth capital

    You can use the loan for product development, infrastructure, sales & marketing, new hires and to pursue other growth strategies.

  • Stay in control

    Under RFB we won’t acquire any shares, take a seat on your board or play an active role in your company.

  • What requirements does your company have to meet?
    • Business: predictable recurring revenue
    • Revenue: at least €40,000 per month
    • Gross margins: at least 50%
    • Diversity: you must have at least 10 paying customers
    • Profitability: not necessary, but we would like to see a plan to become profitable.

Equity Growth Capital

We can provide venture capital to fund your company’s growth plans. In exchange we’ll acquire a stake in the company: in other words, we’ll become a shareholder.

As a shareholder, we will play an active role in your company. We’ll help you examine your strategic choices and think about the best way to achieve your ambitious growth plans.

Once a month we’ll meet and discuss everything that needs to be discussed. But in between times we’ll be at your service as well.

  • Market and sector focus

    We have particular expertise in the IT and internet sectors. By investing in companies that are active in these sectors, we can make maximum use of our investors’ knowledge and experience. We strongly believe that the SaaS model and cloud-based services can give you the edge over your competitors in the B2B and B2C markets.

  • Company

    We provide entrepreneurs with investment and assistance. We don’t take over the running of the company. An entrepreneur and his or her team are decisive factors for a successful strategy, so it’s essential to have confidence in the team.

  • Figures

    We aim to invest between €500,000 and €1.5 million in companies in which we can take a substantial minority stake:

    • Our preferred option is to invest in Dutch companies
    • With revenue of at least €500,000 or similar demonstrable traction
    • With a strong management team that has a track record of delivering results
    • With positive cash flow or a plan to become cash-positive
    • With a clear and feasible plan for growth through technological innovation.
  • We don’t invest in:
    • Manufacturing companies that sell physical products in large quantities
    • Companies without a revenue model
    • Companies that don’t offer a scalable product or service
    • Consultancy firms.

We also feel that it’s important that we have something to add ourselves, so that we can work on realising the plans together.

It is important that we recognise the following elements: the qualities needed to manage and grow the company; commitment and enthusiasm; and the right timing in a market where there is a demonstrable demand for the product or service.

We believe that the first step is to examine how much growth capital you should raise to realise your plans. Not how much you can raise. More isn’t always better. If you would like to discuss your company’s needs, feel free to contact us.

Visiting address:

Haarstraat 25
4201 JA GORINCHEM