Loan type
Revenue-based financing: repayment that flexes with your sales
You repay a fixed multiple by handing over a percentage of revenue until it is settled. Structurally similar to an MCA, but the good versions are priced very differently.
At a glance
| Typical amount | $25,000 to $3 million |
|---|---|
| Pricing | 1.10 - 1.40 factor rate |
| Repayment | A fixed percentage of monthly revenue, commonly 3% to 10% |
| Term | No fixed end date; typically settles in 6 to 24 months |
| Collateral | Usually none; often no personal guarantee from the better providers |
| Underwriting | Platform and bank data — Shopify, Stripe, Amazon, your bank feed |
| Time to funding | 1 to 7 days |
A good fit when
Your revenue is recurring or reliably seasonal, your margins are good, and the capital funds something with a measurable return like inventory or ad spend.
A poor fit when
Your margins are thin. A 6% to 10% revenue share is a very large share of a 15% gross margin.
How it works
You receive capital and agree to repay a fixed total — say 1.15 times the amount — by remitting a percentage of revenue each month until the total is paid. Good month, you pay more and finish sooner. Bad month, you pay less and it takes longer. The total you owe does not change either way.
The underwriting is usually automated and reads your actual platform data. An e-commerce business connects Shopify and its bank; a SaaS business connects Stripe. The lender sees revenue, churn, and seasonality directly, which is why decisions come in days rather than weeks and why traditional documentation matters much less.
How this differs from a merchant cash advance
Structurally they are cousins. Commercially they can be very different animals.
| Revenue-based financing | Merchant cash advance | |
|---|---|---|
| Typical factor | 1.10 to 1.40 | 1.15 to 1.55 |
| Effective annual cost | Roughly 20% to 120% | Roughly 40% to 350%+ |
| Remittance | Monthly percentage of revenue | Daily or weekly fixed debit |
| Personal guarantee | Often none | Usually a performance guarantee |
| Who provides it | Platform-native and specialist funders | Broad broker-driven market |
| Broker involvement | Usually direct | Heavy, and fees are often built into the factor |
Where it fits, and where it does not
- Fits: inventory for a known-seasonal peak. You know the sell-through, the margin, and the timeline. Borrow, buy, sell, settle.
- Fits: paid acquisition with a measured payback period. If your customer acquisition cost is recovered in ninety days and the financing costs 15% over eight months, the arithmetic is straightforward.
- Does not fit: thin-margin businesses. A 7% revenue share against a 12% net margin means more than half your profit goes to the remittance.
- Does not fit: covering a shortfall. Same trap as an MCA. The remittance compounds the shortfall.
The questions to ask before signing
- What is the total payback, in dollars, on the exact amount I am taking?
- What percentage of revenue, and is revenue defined as gross sales or net of refunds and chargebacks? This distinction can move your real cost by several points.
- Is there a minimum monthly remittance regardless of revenue? If yes, this is a fixed loan wearing a flexible costume.
- Is there a discount for early settlement, and is it in the contract?
- Is there a personal guarantee, and what triggers it?
- Can I take other financing while this is outstanding, and what happens if I do?
Questions people actually ask
Is revenue-based financing better than a loan?
Different, not better. It costs more than a bank or SBA loan and less than a typical merchant cash advance. What you buy for the extra cost is speed, minimal documentation, and repayment that flexes down in a bad month. If you qualify for a term loan and do not need the flexibility, the term loan is cheaper.
Does revenue-based financing require a personal guarantee?
Frequently not, which is one of its genuine advantages — several platform-native providers underwrite purely on business data. But read the agreement: some include a guarantee that activates on specific breaches, such as moving your sales off the platform being monitored.
What revenue do I need to qualify?
Most providers want at least $10,000 to $25,000 in monthly revenue and six to twelve months of trading history on a platform they can read. Requirements are lower than a bank's and the verification is faster, because it is automated rather than document-based.