If these would be ANNUAL contracts, and the factoring company took on the risk (as with Affirm or BNPL solutions) then it wouldn't be debt. But these are NOT guaranteed future cashflows.
What happens if a customer churns? "swap out churned contracts with active ones". Yikes.
What if there are no active contracts left? You've just defaulted on that loan.
The marketing seems to suggest that the investor is taking the risk - that is simply NOT true. It's a regular loan, which isn't a bad thing, and isn't easy to come by for many startups, but the tricky marketing is a major turn off.
If these would be ANNUAL contracts, and the factoring company took on the risk (as with Affirm or BNPL solutions) then it wouldn't be debt. But these are NOT guaranteed future cashflows.
What happens if a customer churns? "swap out churned contracts with active ones". Yikes.
What if there are no active contracts left? You've just defaulted on that loan.
The marketing seems to suggest that the investor is taking the risk - that is simply NOT true. It's a regular loan, which isn't a bad thing, and isn't easy to come by for many startups, but the tricky marketing is a major turn off.