B2B Services Financing: Access Growth Capital Without Diluting Equity

What characteristics of the B2B services sector make them difficult to lend to?  Asset-light B2B services and software companies often create real enterprise value, but they do so in a way that is structurally harder to underwrite with traditional credit frameworks. 

Challenges With Traditional Financing Options

Traditional bank credit tends to fail asset-light borrowers for two reasons: (i) insufficient collateral to support a secured facility at meaningful size, and (ii) an underwriting approach that demands stable, provable repayment capacity under conservative downside assumptions. When a bank can’t point to a borrowing base (eligible AR or inventory) or can’t get comfortable with “bankable” EBITDA, the approval path becomes narrow. The result is usually a “no,” or a facility that is too small and too restrictive to be strategically useful.   A services company may have neither, even if it is growing quickly and has strong gross margins.  In that situation, lenders are forced to underwrite the business as a future cash-flow stream, not as a liquidation story.

The second friction point is revenue quality. Many services businesses have revenue that is real but not contractually durable: short-term statements of work, project-based delivery, customer termination rights, and ambiguous renewal behavior. To a lender, that’s a volatility problem.

Even when revenue is reoccurring in practice, the lack of enforceable long-duration contracts can make it look discretionary. That’s why sophisticated lenders focus on customer concentration, cohort retention, churn, and the stability of gross margin as the true collateral for these businesses.

For B2B services companies, equity capital can be a substitute, but it is an expensive workaround especially when the use of funds is not fundamentally equity-like.  Funding working capital, sales hires, or a measurable go-to-market ramp with permanent dilution can be economically irrational if the company has line-of-sight to payback. Equity introduces governance friction, board dynamics, and preference structures that permanently reshape outcomes. Non-dilutive capital exists precisely to finance execution while preserving ownership provided the business can demonstrate the type of revenue durability and financial discipline that lenders underwrite.

How Lenders Get Comfortable When Companies Have Little In the Way of Asset Collateral

In an asset-light business, lenders get comfortable by building repayment confidence across substitute pillars: revenue durability, cash-flow resilience, and operational discipline. The underwriting question becomes: “If we stress revenue, margins, and churn, does the company still have sufficient cash generation to service debt?” This is why lenders request customer schedules, retention analytics, revenue breakdowns, and forward projections because these inputs allow them to underwrite the stability of the cash-flow stream that replaces hard collateral.

A useful way to think about this is the “repayment protection” framework: if one bucket is weak (little collateral), the business must overperform in others (high-quality revenue, stable cash flow, equity cushion, and clean financial reporting). Companies that prepare institutional-grade materials cohort data, churn, concentration, margin bridge, realistic forecast, and a clean narrative around use of funds tend to move through underwriting faster because they reduce ambiguity. In asset-light lending, ambiguity is the enemy: lenders price uncertainty aggressively or simply pass. Your job is to convert “trust me” into verifiable proof.

Understanding Non-Dilutive Financing Options for B2B Services

For an asset-light B2B services company, “non-dilutive” is not a single product it is a menu of structures that price risk differently depending on what the lender can anchor to. Some lenders anchor to revenue (revenue based finance or “RBF”), some to EBITDA and enterprise value (cash flow loans and mezzanine), and some to specific contractual cash flows or payment mechanics (collectively “specialty lenders”).  The practical question is not “debt vs. equity,” but “what form of non-dilutive capital best matches the operating physics of the business and the intended use of funds.”

At a high level, revenue-based financing is typically best when the company has meaningful revenue and a predictable collection pattern but may not have consistent profitability. Cash-flow loans become relevant when the business has stable EBITDA and can withstand fixed debt service and covenant frameworks. Mezzanine (or stretch cash-flow) becomes relevant when the company is strong but wants more total leverage than senior lenders will provide. The common denominator is preparation: lenders will still require institutional-grade clarity on revenue composition, customer quality, margins, and downside resilience.  This is where Accrefi can assist as your advisor. 

How Does Revenue Based Financing Work

Revenue-based financing is designed to convert a portion of future revenue into growth capital today without requiring traditional collateral. Instead of a fixed amortization schedule, repayment is typically a defined percentage of monthly revenue (typically 2-10%, depending on the lender and borrower profile) until cumulative payments reach a contractual payback cap: most commonly 1.2x–1.6x of the original funded amount. This structure matters because it turns debt service into a variable cost synchronized with performance payments compress in softer months and accelerate in stronger months.

Step-by-step example (a $1,000,000 RBF facility):

Assume a company raises $1,000,000 via revenue-based financing.  The facility has

        i)            a revenue share of 6% of monthly revenue 

      ii)            a payback cap of 1.4x 

    iii)            a term of 30 months

In plain English: you pay 6% of top-line each month until the lender has received $1,400,000 total (principal + lender’s return), not to exceed two years from the date of closing.

Step 1 — Define the total repayment obligation (the payback cap).Loan Amount = $1,000,000Payback Cap = 1.4xTotal Payback = $1,000,000 × 1.4 = $1,400,000

Step 2 — Define the monthly payment formula Revenue Share = 6%Monthly Payment = Monthly Revenue × 6%

With $800,000 in monthly revenue:$800,000 × 0.06 = $48,000 per month

Step 3 — Walk through a realistic month-by-month progression Monthly payment = $48,000Cumulative payback target = $1,400,000

• After 10 months: $48,000 × 10 = $480,000 repaid

• After 20 months: $48,000 × 20 = $960,000 repaid

• After 25 months: $48,000 × 25 = $1,200,000 repaid

• After 29 months: $48,000 × 29 = $1,392,000 repaid

Month 30 payment would normally be $48,000, but only $8,000 is required to hit the cap, so the final payment is trued-down.

Result: payoff occurs in Month 30.

Step 4 —Why it’s self-adjusting in soft monthsIf revenue dips to $600,000 one month, payment falls automatically:$600,000 × 6% = $36,000

If revenue jumps to $1,000,000, payment rises:$1,000,000 × 6% = $60,000

That flexibility is the defining feature of RBF repayment speed flexes with operating performance while total dollars paid remain capped.

RBF underwriting is fundamentally revenue-centric. Lenders focus on predictability, consistency, customer mix, churn, and growth trend often sizing advances as a multiple of recurring revenue or a function of trailing average monthly revenue. In institutional RBF, collateral is typically not the driver; many facilities are unsecured in substance, even if the lender uses mechanisms like UCC filings or revenue sweep controls to protect collections.  The trade-off is price: because the lender is leaning on revenue durability rather than hard assets, effective APR/IRR often lands in the mid-teens to high-20s depending on volatility and repayment speed.

Why Does Customer Retention and Churn Rates Matter for Revenue Based Financing

In RBF, customer retention is not a “nice to have” it is the core credit variable. Because the lender’s repayment is directly sourced from revenue receipts, churn is the risk factor that can collapse the repayment base. A company can show impressive new bookings and still be a weak credit if revenue is leaking out the back door. Strong retention, on the other hand, signals that revenue is durable, predictable, and not dependent on continuously outrunning churn through sales spend.

Lenders therefore look for evidence that revenue quality is real: cohort retention curves, renewal behavior, revenue concentration, customer type (SMB vs enterprise), and whether churn is structural or episodic.  Where revenue is shaky, lenders will also look for compensating credit supports equity cushion, investor backing, cash runway, or a clear plan to stabilize collections.  This is also why sophisticated CFOs treat retention as a financing lever: improving churn metrics often improves both access to capital and economics (lower payback caps, more flexible terms, higher advance capacity).

How Should I Structure My Contracts With My Customers To Ensure Eligibility For Revenue Based Financing

For asset-light services businesses, contracts are often the closest thing to collateral. The goal is to make revenue look less discretionary and more enforceable. Lenders gain confidence when agreements clearly define scope, payment terms, invoicing cadence, renewal mechanics, and remedies for non-payment because those terms govern cash collection behavior. Ambiguity creates underwriting friction. Month-to-month arrangements, easy termination-for-convenience provisions, broad refund rights, or heavy dependence on customer acceptance criteria can make revenue appear fragile even if historical collections have been strong.

The most financeable structures tend to share a few traits: recurring billing or minimum commitments, predictable invoicing cadence, clear payment timelines, and limited offset rights that could reduce collections. When a services agreement produces consistent receivables (even if the company is “asset-light” operationally), it becomes easier for lenders to underwrite revenue predictability and to implement light-touch monitoring. In short: clean contracts don’t just reduce legal risk they improve your financing profile and can expand the universe of lenders who will take you seriously.

How A B2B Services Company Can Use a Cash Flow Loan

Cash-flow lending becomes relevant when your services business can demonstrate consistent profitability and durable EBITDA because the lender is sizing the facility against adjusted EBITDA, not against assets. This is the institutional answer to “we don’t have collateral”. Instead of relying on liquidation value, the lender relies on the company’s ability to service debt from operating cash flow over time.  Practically, cash-flow loans are often used for higher-ROI initiatives: acquisitions, geographic expansion, scaling sales capacity, recapitalizations, and refinancing higher-cost capital.

From a structure perspective, cash-flow loans typically run 3–5 years and may include interest-only periods or back-loaded amortization depending on borrower profile and lender type. Underwriting emphasizes EBITDA stability, leverage and coverage ratios, management competence, and industry risk not machinery and equipment. For larger, non-personal-guarantee transactions, the lender often requires deeper diligence and a Quality of Earnings (QoE) report to validate sustainable EBITDA.  Cash-flow debt is a tool for companies that have “graduated” into financial maturity: stable margins, disciplined reporting, and predictable cash conversion, even if the business is asset-light.

Improving Cash Flow Stability Through Alternative Financing

Alternative financing is not just about accessing capital it is about smoothing the operating cycle so management can execute without liquidity whiplash. RBF can stabilize cash flow by aligning repayments with revenue performance, reducing the risk that fixed payments crowd out growth spend during softer periods.  Cash-flow loans can stabilize the business by providing longer-duration capital that funds initiatives with delayed payback (like acquisitions or market expansion) without forcing premature equity dilution.

The strategic lens is capital efficiency: fund the right use of funds with the right instrument. Working-capital gaps, go-to-market scaling with measurable paybacks, and bridge capital to a near-term milestone are often better served by non-dilutive structures than by equity.

Conclusion

B2B services and software companies do not suffer from a lack of opportunity they suffer from a mismatch between how they create value and how traditional lenders underwrite risk. Revenue durability, customer retention, and operating leverage are the real engines of these businesses, yet most capital providers are still optimized for balance-sheet collateral and backward-looking ratios. This disconnect is precisely where non-dilutive capital, when properly structured, becomes a strategic advantage rather than a constraint.

Accrefi exists to bridge that gap. By translating a company’s revenue quality, cohort behavior, cash-flow profile, and growth trajectory into lender-ready underwriting frameworks, Accrefi curates and structures capital solutions that actually fit the operating reality of asset-light B2B companies. The result is not just access to more capital it is access to the right capital, on terms that preserve ownership, protect flexibility, and allow management teams to compound enterprise value without sacrificing control.

Frequently Asked Questions

Why do traditional bank lending models fail B2B services and software businesses?

Banks’ credit models were built for businesses where repayment avenues are clear and relatively certain.  E.g. hard collateral like inventory, equipment, real estate; or a financeable working-capital engine that generates eligible AR.  Because banks are designed to lend against liquidation value, whilst B2B services companies generate value through recurring revenue, customer relationships, and operating leverage that do not sit on the balance sheet.

How do lenders underwrite an asset-light services company with no collateral?

They focus on the durability and predictability of cash flows, analyzing customer retention, churn, contract structure, and margin stability as the true source of repayment.

Can early-stage B2B services or SaaS companies qualify for non-dilutive financing?

Yes, as long as there is observable revenue, strong retention, and a clear path to payback that allows lenders to underwrite repayment from future cash flows.

Why is non-dilutive capital especially powerful for service-based businesses?

Because it allows companies to fund sales, marketing, and growth initiatives using their own revenue engine without permanently giving up equity or control.

How is revenue-based financing different from a traditional term loan?

Instead of fixed principal and interest payments, RBF is repaid as a percentage of monthly revenue, automatically adjusting to business performance.

What determines how much a B2B services company can raise through these structures?

Lenders size facilities based on revenue quality, customer diversification, margin profile, and the stability of cash flows under downside scenarios.

Why do lenders place so much emphasis on customer concentration and churn?

Because diversified, sticky revenue provides far more reliable repayment than revenue concentrated in a small number of customers that can easily be lost.

What role does Accrefi play in helping companies access non-dilutive capital?

Accrefi translates a company’s revenue, financials, and growth story into lender-ready frameworks and connects it to the capital providers best suited to fund it without dilution.