How revenue-based financing works
A funder advances an amount, say $100,000, in exchange for a fixed total, say $125,000, collected as a percentage of revenue, say 8 percent of monthly sales, until the total is repaid. In a $150,000 month the remittance is $12,000; in a $90,000 month it is $7,200. Repayment typically takes six to eighteen months. Underwriting connects to the systems that show revenue in real time: e-commerce platforms, payment processors, subscription billing, advertising accounts and bank feeds, and the offer often follows within a day. Many funders allow repeat draws as revenue grows.
The structure is closest to a merchant cash advance with a monthly percentage instead of a daily one, which makes it gentler on cash flow, and it is sometimes offered by the platforms themselves. Unlike equity, it costs a fixed amount and ends; unlike a term loan, there is no fixed payment and no interest on a declining balance.
What revenue-based financing costs
Published payback multiples run from about 1.10 to 1.40 on the amount advanced. Because the total is fixed, the annualised cost depends entirely on how fast revenue repays it: a 1.20 multiple repaid in six months annualises to roughly 40 percent, in twelve months to about 20 percent. Fees beyond the multiple are uncommon but check for platform, wire or late-reporting fees. The table shows the same $100,000 advance at three multiples and speeds.
| Multiple | Total payback | Repaid in 6 months | Repaid in 12 months | Repaid in 18 months |
|---|---|---|---|---|
| 1.10 | $110,000 | about 20% annualised | about 10% | about 7% |
| 1.25 | $125,000 | about 50% | about 25% | about 17% |
| 1.40 | $140,000 | about 80% | about 40% | about 27% |
| Product | Amount to discuss | Time to fund | Pricing structure | Eligibility review |
|---|---|---|---|---|
| Revenue-based financing | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Contracted repayment cap and fees; check revenue reconciliation terms | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Merchant cash advance | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Contracted remittance amount and fees; a factor rate is not APR | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Business line of credit | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Interest or installment fees by provider; check draw and maintenance charges | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Business term loan | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Quoted interest and fees; compare net proceeds and total repayment | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
Who it fits
Businesses with steady, trackable revenue and a use of funds that grows it: e-commerce brands buying inventory ahead of the fourth quarter, subscription businesses funding acquisition with known payback, agencies and services firms with recurring contracts, and any business that can show a return on marketing or inventory spend. It fits poorly where revenue is lumpy or seasonal in a way the funder cannot model, where margins are thin, or where the money funds a fixed asset better matched to equipment financing or a term loan.
Qualification is light on history and credit and heavy on data: usually six months of revenue, $10,000 or more a month, and connected sales and bank accounts. Growth and gross margin lift the offer; a declining trend or high refund rates cut it.
Connect or upload
Revenue-based financing file
- Read-only access to sales platform and payment processor
- Six months of business bank statements
- Advertising account access if marketing is the use
- Gross margin and refund rate
- Formation documents and EIN
- Existing financing with balances
Revenue-based financing versus advances, loans and equity
Against a merchant cash advance: similar pricing logic, but monthly rather than daily remittance, larger amounts, and underwriting on platform data rather than card receipts. Against a term loan: no fixed payment and faster approval, but usually higher cost and no benefit from early repayment. Against equity: no dilution, no board, and a cost that ends, but a real drag on cash flow during repayment. The right comparison is on total payback and on the payment’s fit with your revenue pattern, which the estimator below shows.