Non-dilutive financing: what options are available?

What is non-dilutive financing?

Non-dilutive financing enables entrepreneurs to raise funds without diluting ownership or control of their business.

It's an attractive option for maintaining total control over your company's vision and direction.

What are the differences between non-dilutive and dilutive financing?

Unlike the dilutive financing, where you sell a share of your company in exchange for capital, the non-dilutive financing allows you to keep all your capital while accessing the necessary funds.

Dilutive financing generally involves raising funds (business angels or venture capital funds). Non-dilutive financing takes the form, for example, of a bank loan or an equity contribution from the partners.

What are the non-dilutive financing options?

There are a multitude of non-dilutive financing options:

• Shareholders' equity

• Love money

• Business credit with a bank

• Affacturage

• Public subsidies

• Crowdlending

• Royalties

Let's take a look at some of the most relevant.

Equity and love money

Les equity are the personal savings that you invest in your company.

Le "love money "for its part, is the money lent by family and friends who believe in your project. These funds are often the first capital an entrepreneur raises.

Bank loans

Traditional bank loans are another form of non-dilutive financing. According to the INSEE , every quarter, 15% of French SMEs receive a new loan from the banks .

This financing method is often preferred for its clear repayment structure and lack of capital dilution. However, it requires sound financial health and a solid credit history.

Factoring

Factoring is an option whereby a company sells its invoices to a third party. often a factoring company, which provides immediate liquidity.

This allows entrepreneurs to keep their business running without waiting for payment from customers. This is a particularly useful option for companies with long sales cycles who need cash to maintain their operations.

However, the offers proposed by banks are often restrictive :

• No flexibility

• Need to sell all invoices

• Reserved for companies of a certain size

• Administrative burden

Hero propose une offre plus moderne en “Accelerated Payout” a solution that provides fast, flexible liquidity, without the constraints of banking offers.

Entrepreneurs can freely choose which invoices to finance, with transparent rates.

Public subsidies

Grants are non-repayable funds provided by the government or other organizations.

Le honorary loan is a concrete example of a public subsidy that stands out for its accessibility to entrepreneurs. Granted without requiring personal guarantees or sureties It offers a financial boost in addition to other financing. For example, a Initiative France offers interest-free loans to help business start-ups and takeovers boost their bank financing.

Another example: Research Tax Credit (CIR) which provides a tax reduction of 30% for R&D expenditure up to 100 million euros and 5% above that figure . However, you have to advance the expenses before receiving the CIR the following year: you need intermediate financing. Fortunately, it is possible to ask for the administration's opinion to ensure that the financing will be validated .

Le crowdlending

Crowdfunding, or participatory lending, is a mechanism whereby entrepreneurs borrow money directly from a group of small investors.

A number of platforms facilitate these set-ups:

• October a platform that has facilitated the financing of more than 4,000 projects for a total amount of over 1 billion euros!

• Miimosa specializes in financing agricultural and food-related projects. It is an ideal platform for entrepreneurs operating in these sectors.

• Finple offers a variety of participatory financing options, including private equity and participatory loans.

• PrêtUp is renowned for its responsiveness and entrepreneur-centric approach. The platform offers a streamlined experience, with accelerated procedures to enable entrepreneurs to access funds quickly.

• Les Entreprêteurs stand out for their focus on supporting and assisting very small businesses.

Income-based financing and royalty financing

Le Revenue Based Financing (RBF) and royalty financing involve the repayment of invested capital via a percentage of monthly income of the company, ensuring flexibility in reimbursement.

RBF and royalty financing are particularly suitable for companies with predictable and recurring revenues, such as :

• SaaS companies

• E-commerce companies

• Experienced content creators

The flexibility of income-linked repayments makes this option attractive: in periods of falling income, repayments are also reduced.

Let's take the he example of an e-commerce which has obtained financing from 200 000 € via RBF . It undertakes to reimburse 10% of monthly income . If the monthly income is €50,000, he will repay €5,000 that month. Repayments continue until the loan is repaid in full. This keeps repayments manageable, adapted to fluctuations in the company's income.

If this e-tailer makes the choice of royalties reimbursement is slightly different: a percentage of sales is also defined (e.g. 10%). However, the Payments are made over a defined period (e.g. 5 years). The total amount repaid may therefore be considerably less or greater than the amount borrowed. For example, if the e-tailer achieves sales of €4 million in 5 years, he will pay €400,000 in royalties (double the financing).

Across the Atlantic, platforms such as SaaS Capital et Lighter Capital propose RBF.

In France, Hero offers income-based financing solutions talk it over with our advisors.

Other platforms exist in Europe: Silvr and Karmen offer short-term lending in RBF, while Look&Fin et Sowefund offer crowdfunding royalty solutions.

What kind of non-dilutive financing should you choose, depending on your startup's stage of development?

The choice of financing depends on your company's stage of development.

What kind of non-dilutive financing is right for a startup in its early stages?

When your startup is still in the seed stage, financing options are often limited due to the high risk of default and the absence of stable revenues.

Love money and equity are the most accessible solutions.

What kind of non-dilutive financing is right for a startup in the early stages of growth?

At this stage, your startup has validated its product or service and is starting to generate revenue.

The need for working capital is growing, making it difficult to finance: a flexible, fast solution is needed.

If this sounds like you, Hero is the right financial partner for you:

• Hero Extra Cash allows you to obtain an advance payment on your supplier invoices.

• With Hero Cash You can optimize the receipt and security of your customer payments, with guaranteed payment without delay.

• Hero Checkout facilitates the payment process for your B2C and B2B customers on your website, by offering deferred or split payment options (BNPL).

The Hero is characterized by its flexibility . You have the freedom specifically select the invoices and customers you wish to finance.

What kind of non-dilutive financing is right for a startup expanding into new markets?

At this stage, your start-up has sales of several tens of millions of euros: it's ready to expand and conquer new markets. The need for financing becomes greater:

1. Bank loans may be a viable option, provided the company can demonstrate its profitability and ability to repay the loan.

2. For profiles less appreciated by banks, Income Based Financing is also an attractive option, as it offers additional flexibility.

Non-dilutive financing for SMEs?

For SMEs with an established business model and more predictable revenues, factoring can be a viable solution .

This solution provides immediate access to funds based on pending invoices, helping companies to meet their financial obligations without delay.

Banks have many requirements when it comes to factoring. Discover Hero's no-strings-attached offer.

What are the best non-dilutive financing platforms?

Here are some platforms that stand out for their innovative solutions:

• Hero Hero: specialized in cash flow financing and payment facilities, Hero provides rapid access to liquidity with minimum constraints.

• Silvr: offers income-driven financing options with flexible reimbursements.

• Unlimitd: stands out with simple products . For e-tailers only.

In conclusion, choosing the right financial strategy is essential for growth. With Hero, the non-dilutive financing is an ideal solution, combining flexibility with the preservation of corporate autonomy.

Other articles on the same subject:

• Alternative financing: everything you need to know from A to Z

• How to open a business with no money in 5 steps?