Retainers vs. Project Based Revenue in the eyes of SBA lenders

March 05, 2023

by a searcher from University of Washington in Seattle, WA, USA

Hi everyone,

I've seen a couple of creative agencies and consulting firms advertise a high portion of their revenue from retainers vs project based work.

An SBA lender I spoke to said they don't like businesses with a high share of project based revenue because it's non-repeat. Does anyone have opinions on whether retainers have different risk profile both as a searcher and a lender?

Thanks for all the great information shared!

Eric

Reply by a searcher
from University of Notre Dame in Dublin, OH, USA

In general, recurring/subscription revenue is higher quality revenue than project-based/transactional revenue — certainly in the eyes of a risk adverse lender, but this is also true in a more objective sense. I highly recommend AJ Wasserstein's paper "On the Nature of Revenue": https://yale.box.com/s/2tx5o79dxjz3t5lvjexgoidg9ci2neyy

Reply by a professional
from University of Idaho in Boise, ID, USA

As the owner of a creative agency, retainer based income is becoming more rare, I think. The 'Agency of Record' sort of engagements aren't as common as they used to be. Yes, it's probably more reliable revenue, but the industry shifting, so expectations probably need to follow suit.

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