There is a moment many founders reach — usually somewhere between “things are going well” and “we could really accelerate this” — where the conversation turns to funding.
And almost without exception, that conversation defaults to two options: keep bootstrapping, or bring in investors.
It is an understandable reflex. Equity investment is visible, well-documented, and carries a certain cultural cachet. The bootstrap narrative has its own mythology. Between the two, they dominate the discourse around how businesses fund their growth.
What gets far less attention is the substantial territory that exists between them. Non-dilutive funding — capital that does not require you to hand over a share of your business — is more varied, more accessible, and more relevant to a wider range of businesses than most founders realise.
This article focuses on two options in particular: revenue-based financing and asset-backed lending. Not because the others are unimportant, but because these two are genuinely underused by the businesses that could benefit most from them, and because the reasons they get overlooked are worth examining.
The Default Conversation and Why It Keeps Happening
When a founder starts thinking about funding, the path of least resistance leads to equity. Accountants discuss it. Business press celebrates it. Accelerators are built around it. The vocabulary of funding rounds, valuations, and term sheets is familiar in a way that invoice finance or revenue-based lending simply is not.
There is also a psychological dimension. Equity investment can feel like validation — a signal that someone external believes in the business enough to back it with capital. That feeling is real, and it is not without value. But it can also distort decision-making, leading founders to pursue investment not because it is the right instrument for their situation, but because it is the most legible one.
The consequence is that too many founders reach growth inflection points and give away equity to solve problems that did not require it. And the cost of that decision rarely becomes apparent until much later, usually when they are sitting across a table from a buyer.
Before we get to the options themselves, that cost is worth understanding clearly.
What Equity Actually Costs
Equity feels different from debt. There is no monthly repayment, no interest rate, no invoice arriving at the end of the quarter. This makes it feel, at the point of transaction, like the low-risk choice.
It is not. The cost is real — it is simply deferred, and it lands hardest at exit.
If you give away 20% of your business during a growth phase and later sell for £5 million, that decision cost you £1 million on exit day. Not in the moment, not visibly, but the number on the completion statement is a million pounds lower than it would otherwise have been.
And that is before accounting for the structural complexities that often accompany equity investment: preference stacks, anti-dilution provisions, pro-rata rights on future rounds. These are standard features of many investment agreements, and they exist to protect the investor. Under certain exit scenarios, they can mean the headline sale price looks considerably different from the amount that actually reaches the founder.
There is a second cost that rarely appears in any spreadsheet. Once an investor is on your cap table, you are no longer building entirely on your own terms. Their timeline, their return expectations, and their growth thesis become part of the equation — and they do not always align with yours. This rarely plays out as open conflict. It is more often a steady background pressure: to hit particular milestones, to pursue growth vectors you might not have prioritised, to consider an exit before you are ready, or to delay one when you are. Founders who have taken equity frequently describe a subtle but persistent shift in who the business is really being built for. Non-dilutive funding does not just protect your ownership percentage — it protects your pace.
None of this is an argument against equity investment as a category. For the right business, at the right stage, with the right investor, it can be entirely the right choice. The argument is simply that it should be a deliberate choice, not a default arrived at because the alternatives were never properly explored.
Revenue-Based Financing: Broader Than You Think
Revenue-based financing (RBF) works on a straightforward principle. A lender advances a lump sum of capital. In return, the business repays that capital, plus a fixed fee, as a percentage of its ongoing revenue until the total amount is settled. No equity changes hands. No dilution. Repayments flex with the business: higher in strong months, lower when revenue dips.
The problem is that RBF has developed a strong association with one particular business model: the SaaS company with annual subscription plans, a clear ARR figure, and a Bronze/Silver/Gold pricing structure that makes revenue straightforward to underwrite.
That association is not wrong, but it is limiting. It has led many founders outside the SaaS world to dismiss RBF as irrelevant to their situation, and in doing so, to miss a genuinely useful instrument.
The underlying requirement for RBF is not a subscription model. It is predictable, recurring revenue. And that exists across a much wider range of businesses than the technology sector alone.
A facilities management company with multi-year service contracts. A professional services firm with retained clients on rolling agreements. A manufacturing business supplying components under long-term supply arrangements. A specialist recruiter with repeat clients and consistent placement volumes. None of these businesses look like SaaS companies. All of them may have the revenue profile that makes RBF a viable option.
The key questions a revenue-based lender will examine are: how consistent is the revenue, how long has that consistency been established, and what is the realistic trajectory. Annual recurring revenue in the traditional sense is one way to answer those questions. It is not the only way.
Customer quality matters too. Lenders do not just look at revenue volume — they look at who is generating it. A business with ten long-standing clients on multi-year contracts, paying reliably and on time, is a fundamentally different underwriting proposition to one with the same revenue spread across hundreds of short-term or transactional relationships. Concentration can cut both ways: a lender may be cautious if too much revenue sits with a single customer, but a roster of well-established, creditworthy clients is a genuine asset in this conversation. If your customers are household names, public sector bodies, or businesses with strong balance sheets of their own, that strengthens your case considerably. It is worth making that case explicitly, rather than assuming the revenue number speaks for itself.
The exit dimension. For a founder planning an exit in the medium term, RBF has a specific advantage worth understanding. Because no equity is given away, the capital structure of the business at exit is cleaner. Buyers and their advisors scrutinise funding arrangements carefully. A business that has funded its growth through RBF, repaid it, and arrived at the sale process with its equity intact is in a structurally stronger position than one carrying diluted ownership and a complex investor agreement.
There is also a signalling dimension. A business that has successfully accessed and repaid revenue-based financing has demonstrated, to a sophisticated buyer, that it has predictable, bankable revenue. Revenue quality — its recurrence, its concentration, its contractual underpinning — is one of the factors that moves valuation multiples. The discipline of qualifying for RBF can, in itself, be preparation for exit.
Asset-Backed Lending: The Capital You Already Have
Asset-backed lending operates on a different principle. Rather than underwriting future revenue, the lender underwrites existing assets. Capital is released against the value of what the business already holds and repaid over time, with the asset serving as security.
The category is broader than many founders realise, and includes several distinct instruments.
Invoice finance advances a proportion of the value of outstanding invoices, typically between 70% and 90%, before the customer has paid. The lender collects payment from the customer, deducts their fee, and releases the remainder. For businesses with long payment terms or large debtor books, this can release significant working capital that is currently sitting inert in unpaid invoices.
Asset finance works against physical assets: plant, machinery, vehicles, equipment. It can be used to spread the cost of acquiring new assets, or to release capital against assets the business already owns. For businesses with meaningful physical infrastructure, this is often an underused source of funding.
Commercial mortgages and property-backed lending apply where the business owns or has equity in commercial property. The amounts involved can be substantial, and the terms are often more favourable than unsecured borrowing.
The common thread is that these instruments unlock capital that already exists within the business, rather than requiring the business to give something up or take on pure risk-based debt.
Why this gets overlooked. There is a tendency among founders, particularly those who have built service businesses or knowledge businesses, to think of themselves as not really holding assets in any meaningful sense. The business is the people, the relationships, the reputation. What assets are there to speak of?
This framing causes founders to overlook things that are genuinely valuable to a lender: the debtors on the balance sheet, the equipment in the building, the lease on the premises. These are not inert features of the business. They are potential sources of capital, if approached with that lens.
The irony is that founders who are reluctant to approach a bank for unsecured lending, because it feels risky or because they assume they will be declined, may be sitting on assets that make secured lending perfectly accessible. The conversation simply never happened because no one framed it that way.
The exit dimension. Asset-backed lending, used thoughtfully, can improve a business’s position at exit in ways that are not immediately obvious.
A business that has used invoice finance to maintain healthy cash flow is less likely to have stretched supplier relationships, made poor short-term decisions under cash pressure, or taken on unfavourable commercial terms to survive a difficult quarter. Cash flow discipline and the absence of those problems is visible in the numbers during due diligence, even if the cause is not.
More directly: a founder who has used asset-backed lending to fund a capital investment, whether new equipment, a larger premises, or a technology upgrade, without giving away equity has retained full ownership of the upside that investment creates. If that investment improves capacity, margin, or revenue quality, the benefit accrues entirely to the founder at exit.
The Other Options, Briefly
R&D tax credits and Innovate UK grants deserve mention, though they operate differently. R&D tax credits are a HMRC relief — cash back on qualifying research and development expenditure — and are more accessible than many founders assume. If your business is developing new products, improving existing processes, or solving technical problems that are not straightforward, it is worth establishing whether you qualify. Innovate UK grants are competitive and more selective, but for businesses working on genuinely innovative projects, they represent non-repayable, non-dilutive capital.
Neither of these is a growth funding instrument in the same way as RBF or asset-backed lending, but both are worth understanding as part of the full picture.
The Question Founders Should Be Asking
The funding conversation typically starts with: how do we raise capital?
The more useful question is: what does this stage of growth actually require, and what is the most appropriate way to fund it?
Those are different questions, and they lead to different conversations. The second question opens up the full spectrum of options, including those that do not require you to give anything permanent away. It also introduces a third question that too few founders ask early enough: what will this funding decision look like on exit day?
The choices made during growth — how capital was raised, what was given up to access it, what the balance sheet looks like as a result — do not disappear when the exit conversation begins. They shape it. They affect what buyers see, how they value the business, and ultimately what lands in the founder’s account when the transaction closes.
Non-dilutive funding will not be the right answer for every situation. But for too many UK founders, it never makes the shortlist — not because it was considered and rejected, but because it was never properly on the table.
That is the gap worth closing.
