Revenue-Based Financing

Revenue-based financing advances capital that is repaid as an agreed share of monthly revenue, continuing until the provider has received a predetermined multiple of the original amount. There is no fixed monthly payment and no equity is issued.

Repayment flexes with performance: a strong month repays faster, a weak month repays slower. The total repaid is capped by the multiple rather than by a term.

It suits companies with predictable recurring or transactional revenue that need capital for a specific, measurable purpose — inventory, marketing spend, or hiring against known demand. It is commonly used by SaaS and e-commerce businesses that want growth capital without dilution.

It works poorly for pre-revenue companies or those with lumpy, unpredictable income.

• Revenue share percentage — the portion of monthly revenue diverted to repayment
• Repayment cap or multiple — total amount to be repaid
• Minimum revenue covenants
• Prepayment terms — whether early repayment reduces the cap
• Security or personal guarantees, where required

• The revenue share reduces cash available for operations every month
• Effective cost can be very high if revenue grows quickly
• Covenants may restrict additional borrowing
• Unsuitable for businesses with volatile or seasonal revenue