Subscription Finance

Subscription-style business models have been popular for a long time, whether that was through traditional IT agreements that saw a provider offering monthly maintenance to a customer or even just a magazine subscription; the model has flourished for decades. 

Now, the rise of ecommerce and the internet has also brought the subscription box business model into light. This type of business is growing in popularity, allowing retailers to combine supplier stock into a single box for a cost-efficient retail package that appeals to niche markets. Gift boxes now exist for many different purposes: from confectionary and desserts to ‘geek’ products, sportswear and more. 

Subscription-box businesses operate in a unique space that is somewhere between ecommerce and service businesses built on regular, recurring clients. Each customer who signs up for your subscription is a valuable asset that helps you build revenue and plan for growth. Each cancellation is, therefore more impactful as it’s not just losing a one-off sale like in ecommerce, but losing a longer-term revenue stream. 

This uncertainty and more rigid income model means subscription-based businesses may need finance to help overcome periods of poor cashflow or to help fuel growth. When your profits are tied directly into subscription fees, generating a fixed sum to invest in marketing, upgrading your premises, paying for insurance or any other purpose means you might need to approach the lender’s market. 

Finance in the subscription sector

Subscription boxes aren't a new idea, but they are a relatively modern trend in the digital world. Ecommerce finance itself is still relatively new, but lenders have adapted to the changing trends of consumers and the wider digital landscape. Mainstream banks will now consider ecommerce businesses, but specialist lenders are still preferable as they understand the industry and offer more competitive rates. 

In the case of subscription box finance, lenders need an extra level of specialism to be able to assess the risk and repayability of loaning to you. As your income is fixed against subscription numbers, the lender will want to see how many subscribers you have, how you retain them and what your projections are. 

Crucially, no lender will offer you finance if you do not have an established subscriber base. If you’re a startup with a new subscription business, you’ll need to look into alternative sources of finance such as a loan secured against your personal assets. 

Rather than rely on guesswork, choose Rangewell to help you make your financial goals a reality. We work with subscription-style businesses frequently, both in ecommerce and technology. 

General finance options

The majority of established subscription-based businesses will be able to access a commercial business loan. This may be unsecured if you have a proven business model and active subscriber base, but may also be secured against business assets. If you don’t have an active client base, you’ll need to apply for a personal loan that is secured against your assets. 

If you’re running a technology-based subscription business, take a look at our SaaS funding page to find out more about how we can support you in a competitive market. 

Cashflow finance for subscription boxes

As a business, your cashflow is tied directly to your income stream and in a subscription model, this means you’re reliant on customers paying regularly and on time. If you bill at the end of the month, you may not have cash available mid-month. This is where cashflow finance comes into play and can help alleviate your financial troubles. 

While subscription businesses tend to have redundancy built into contracts (such as a 3-month cancellation period), there’s still plenty of uncertainty when you’re between payment cycles. Cashflow finance helps you raise the cash you need to take action now without waiting for client payments. 

Buying competitor businesses

As your business grows, you may have the opportunity to purchase a competitor’s business. This can be beneficial, but also expensive – you’ll likely have to pay their asking price and also account for the added cost of their employee’s salaries and other expenses. 

To raise the finance needed, you’ll need to turn to lenders. With a subscription model, lenders may be less willing to offer the level of funds you need to buy your competitor’s business. However, with the right approach, you can secure the right terms and rates to suit you. Work with Rangewell, and we’ll help you build an application that shows your business in the best light. We’ll also advise you on the competitor’s listing and help negotiate on price if required. 

Ultimately, buying a business is always a big decision – so why do it alone? Consult Rangewell for impartial support, and if you want to go ahead, we’ll help you win lender interest. 

Asset finance

If your business needs any new assets such as office equipment or technology, it may be difficult to fund it using your revenue stream. When your business is tied to subscriptions, making additional costly purchases can be hard to justify. 

Asset finance is the perfect option, providing upfront capital to invest in assets such as office equipment or stock production machinery. The finance is offered via a repayment model that spreads the cost over the service life of the equipment. The lender is paying for the asset so it doesn’t appear on your balance sheets. 

Asset finance is a great option when you need to make a large-scale investment in new assets, such as when moving to new premises or launching a new arm of the business. Take a look at our asset finance page to learn more. 

Refinancing for Subscription businesses

If you’re already in a finance arrangement that doesn’t work for your current business goals, why not consider business refinancing? Choosing a new lender and a different agreement can help you access better rates, longer terms or even consolidate multiple facilities into a single repayment plan. 

For subscription-based businesses, refinance can be very useful: imagine you have taken out multiple loans at the start of your business and have now established a stable customer base. Rangewell can work with you to consolidate those loans under a single lender who can offer fixed repayments that match your own invoicing cycle. 

Refinancing isn’t just for mortgages – it can help your business get on top of existing debt or maximise cashflow. 

Expert advice for subscription finance

Whatever type of subscription you run, you’ll rely on regular payments from your customers to keep your cashflow intact and to grow your business. Finance helps free you from that cycle and gives you more options to upgrade your facilities or equipment, invest in marketing, absorb a competitor or anything else that will support your business. 

Whatever type of financial product you’re interested in, you need an expert on your side to help you deal with the challenging lender’s market. As a ‘risky’ sector, lenders may hesitate to offer finance to subscription-based businesses without the right application. We’ll negotiate on your behalf and help you secure the funds you need. 

Choose Rangewell as your finance partners when running a subscription business to have a team on your side whenever you need to find funding for growth. We’ll help you negotiate a facility that supports your business model, no matter how unusual or complex it may be. Get in touch to get started.