In fixed-rate lending, businesses repay a predetermined loan amount with fixed interest over a set period. This structure provides predictable repayment schedules for borrowers and fixed returns for lenders, regardless of the business’s financial performance.
In contrast, revenue-sharing crowdfunding on Togetherise ties repayments to the business’s actual revenue. Key differences include:
- Variable Repayment Periods: While the total repayment amount is pre-specified, the repayment timeline is flexible, depending on the business’s revenue performance.
- Performance-Based Returns: Investors receive a fixed percentage of the business’s revenue. Higher revenues can lead to faster repayments and potentially higher Annual Profit Rates (APRs), while lower revenues may extend the repayment period and reduce APRs.
- Aligned Interests: The repayment model ensures that businesses are not burdened with fixed payments during slower periods, aligning investor returns with business success.
Investing in revenue-sharing crowdfunding carries inherent risks, including the potential loss of the investment if the business underperforms. Investors can select offerings based on their individual risk tolerance, ranging from lower-risk opportunities with modest returns to higher-risk options with potentially greater rewards.
