Pre-Revenue vs. Post-Revenue: What Lenders Really See
Startup success isn’t linear. “Pre-revenue” and “post-revenue” aren’t badges — they’re risk buckets that change how you get funded, on what terms, and whether you survive when cash gets tight. The #1 reason businesses fail is lack of working capital. Here’s how to avoid the trap and stack the right capital at the right time.
Pre-Revenue: Signals, Not Stories
Pre-revenue is not a scarlet letter — it’s a signal. Lenders can’t price dreams; they price risk. At this stage, you’re funded on assets, contracts, collateral, personal strength, and unit-economics logic — not on your pitch deck adjectives.
| What Lenders Look For | Why It Matters | Reality Check |
|---|---|---|
| Skin in the game (cash, time, guarantees) | Shows commitment, reduces default correlation | Expect personal guarantee and tighter terms |
| Assets & equipment value | Hard collateral shortens loss-given-default | Leases/EFA can be cheaper than cash burn |
| Pipeline quality (LOIs, POs, signed pilots) | Contracted cash beats forecasted slides | Convert prospects to paper before applying |
| Founders’ credit & experience | Operational maturity lowers execution risk | Weak credit = higher cost or smaller limits |
| Runway & working capital plan | #1 failure driver is cash starvation | No plan = decline or predatory offers |
Tip: Finance equipment with an asset-backed structure and keep cash for payroll, marketing, and delivery risk.
Use equipment leasing or EFA and preserve working capital for the messy middle between order and cash-in.
Post-Revenue: Proof Helps, Guarantees Don’t Exist
Revenue is proof — not insurance. Lenders will still test durability: seasonality, margins, customer concentration, and cash conversion cycle. You don’t get cheaper money for being loud; you get cheaper money for being predictable.
| Metric | Healthy Signal | Why Lenders Care |
|---|---|---|
| Gross margin | ≥ 30–40% | Absorbs shocks from cost and price moves |
| Cash conversion cycle | < 45–60 days | Faster payback lowers funding friction |
| Revenue trend | 3–6 months up or stable | Stability reduces perceived default risk |
| Customer spread | < 20% single-client share | Less concentration = less catastrophe risk |
As your proof strengthens (contracts, collections, margins), your cost of capital drops and options expand.
The Lender’s Risk Lens (Tell-It-Like-It-Is)
- Repayment source: If it’s not obvious on Day 1, you’re paying more — or getting declined.
- Use of funds: Assets and revenue creation beat plugging losses. Lenders price the difference.
- Exit paths: Collateral, cash flow, or refinance. No exit = expensive money.
- Documentation: Sloppy paper signals sloppy collections. Clean docs = faster approvals.
Build a Funding Stack That Doesn’t Choke Your Runway
| Stage | Use | Best-Fit Instruments | Why | Liberty Resources |
|---|---|---|---|---|
| Pre-Revenue | Acquire revenue-producing assets | Equipment Lease/EFA, PO/Invoice Finance, Grants/Angels | Asset-backed, ties payments to production/delivery | Equipment Leasing |
| Early Post-Revenue | Smooth cash gaps, repeat orders | Short Term Loans, LOC, ABL, Factoring | Matches financing to cash conversion cycle | Unsecured Loans |
| Scaling | Multi-asset expansion, hiring | Term Loans, Larger Leases/EFA, Bank/SBA with history | Lower cost as proof compounds | Secured Loans |
| Vendor Channel | Boost close rates, faster approvals | Vendor Financing Programs | Transfer underwriting lift to us; you sell more | Vendor Sign-Up |
Keep MCA as a last-resort tool and understand factor rates, early payoff terms, and consolidation risks:
MCA FAQs,
Factor Rate Impact,
Early Payoffs.
Working Capital: Why Good Businesses Still Die
Lack of working capital kills otherwise solid businesses — especially in the gap between orders and cash-in. Your plan needs buffers, not hopes.
| Input | Rule of Thumb | Target |
|---|---|---|
| Monthly fixed burn | Include debt service & payroll taxes | |
| Runway buffer | 3–6 months cash on hand | Closer to 6 if pre-rev or seasonal |
| DSCR (Debt Coverage) | EBITDA ÷ Debt Service | ≥ 1.25x (post-rev) |
| Inventory & AR days | Shorten with terms, factoring, deposits | < 60–75 days total |
MCA Consolidation vs Reverse MCA and
Is an MCA a Loan?
Your Path to “Yes” (Pre-Rev & Post-Rev)
Checklist
- Document your proof: LOIs/POs/pilots, or 3–6 months bank statements with stable deposits.
- Match instrument to need: Assets → lease/EFA. Gaps → LOC/ABL. Projects → term loan.
- Preserve cash: Finance equipment; don’t cash-buy unless the discount beats financing cost.
- Terms literacy: Know factor rate vs APR, early payoff math, and covenants.
- Plan your exit: Seasonal step/skip payments, Section 179 benefits, or refinance path.
If your needle isn’t in the green, adjust the stack — not just the story.
Let’s Structure This the Right Way
Liberty Capital Group has funded startups and scaling companies for 20+ years. We’ll help you avoid expensive detours, protect runway, and get approvals that match how your business actually makes money.
