Revenue-based financing is funding sized on what a business brings in, rather than on collateral or a long credit history, and the term covers two different products. In venture and software circles, an investor provides capital and takes a percentage of each month's revenue until a set cap has been repaid. For most small businesses, revenue-based funding means a merchant cash advance, where a funder buys a share of the business's future sales, pays for them in advance and collects a set daily or weekly payment sized on its usual revenue. The second kind is what we place, and revenue-based financing through us runs from $5,000 to $2,000,000 and is typically funded within one to two business days of choosing an offer. Below is how each version works, how the amount is worked out from your deposits, what it costs, what funders look at and how to apply.
What revenue-based financing means
Search for revenue based financing and you will find two groups of providers using the same words for different contracts. Both judge the business mainly on its revenue, and both put a fixed limit on what is repaid, so the total is known before anyone signs. They differ in who they are built for, how the payment is set and how long the money usually stays out.
| Question | Venture or SaaS style | Small business style (what we place) |
|---|---|---|
| Who uses it | Software, subscription and online companies with recurring revenue | Established businesses of almost any kind with steady deposits |
| How the amount is set | From monthly or annual recurring revenue and growth | From average monthly deposits on four months of bank statements |
| How it is repaid | A percentage of each month's revenue until a cap is reached | A set daily or weekly payment until the purchased amount is collected |
| How the cost is stated | A repayment cap, written as a multiple of the amount funded | A factor rate and a total payback in dollars |
| How it is usually structured | A loan | A purchase of future receivables |
The venture model, repaid as a share of revenue up to a cap
In the venture version, a provider funds a company and takes an agreed percentage of its monthly revenue until a cap is reached. Say a software company with $150,000 in monthly revenue takes $300,000, agrees to pay 7% of revenue each month and accepts a cap of 1.4 times the amount funded, or $420,000. At $150,000 a month the payment is $10,500, and if revenue climbs to $200,000 the payment becomes $14,000, so the cap is reached sooner. These figures are an example only.
The SBA recognizes this structure in its rules for Small Business Investment Companies. Under 13 CFR 107.810, the loans those funds make may include revenue-based financing or revenue-based loans, provided in exchange for a percentage of the business's anticipated future revenue that cannot exceed 19% of its annual gross revenue. This kind of revenue based lending tends to suit companies with high margins and recurring subscriptions, its providers are often called revenue based lenders, and it is the version most startup-focused articles describe. The funders we work with use the small business model below instead.
How small business revenue-based funding works
The small business version is a merchant cash advance. The funder agrees to buy a fixed amount of your future receipts, called the purchased amount, and pays you a smaller sum for them today, called the purchase price. It then collects a set payment from your business bank account each business day or each week until the purchased amount has been collected, and once it has, the deal is finished. The price is a factor rate fixed at signing, so an $80,000 advance at 1.30 means $104,000 collected in all, and nothing accrues while it is open.
The payment is worked out from what the business usually deposits, which is why the decision rests on bank statements rather than collateral or tax returns. You know before you sign how much leaves the account each week and roughly when the last payment lands, and you can plan the rest of your spending around a figure that does not change from one week to the next. Many contracts also include a reconciliation clause, which lets the owner ask the funder to review recent statements and adjust the payment if sales change, and it is worth asking how that clause works on any offer you are comparing. Virginia's statute on sales-based financing covers financing repaid as a fixed payment with a reconciliation process of this kind, alongside deals repaid as a straight percentage of sales.
Owners often search for revenue based business loans or business loans based on revenue, and this is usually the product they find. Legally it is written as a purchase of receivables rather than a loan, and our comparison of a merchant cash advance and a business loan covers that difference. For every line of an offer from signing to the final payment, see our guide to what a merchant cash advance is and how it works.
How the amount is sized from your deposits
Funders start with the business's average monthly deposits from sales over the last four months, then offer a multiple of that figure. The multiple depends on how steady the deposits are, how much sits in the account on a normal day, whether other advances are already being paid, how long the business has been open and the term the funder has in mind. Here is one example worked through in dollars. It is an illustration, not a quote, because real terms depend on the funder and the file.
| Item | Example |
|---|---|
| Sales deposits, last four months | $76,000, $83,000, $79,000 and $82,000 |
| Average monthly deposits | $80,000 |
| Amount offered (one month of deposits) | $80,000 |
| Factor rate | 1.30 |
| Total payback | $104,000 |
| Cost in dollars | $24,000, or 30 cents per dollar received |
| Payment | $2,600 a week for 40 weeks |
| Share of a usual week's deposits | About 14% of roughly $18,460 |
The last row shows why the payment is sized on deposits. Monthly deposits of $80,000 come to about $18,460 in a usual week, and a $2,600 payment leaves the business with most of its weekly receipts for payroll, rent and stock. The same total could be collected as about $520 each business day over 200 business days, and some funders prefer daily collection while others offer weekly.
Several things move the number up or down. If the business already pays another funder $1,500 a week, the new funder counts that against what the deposits can carry and offers less. Transfers from savings, loan proceeds and money the owner puts in are taken out of the deposit figure, since they are not sales. A longer term lowers each payment, and the funder prices that extra time into the factor rate it offers.
What revenue-based financing costs
The cost is the difference between the total payback and the amount you receive, plus any fee taken out at funding. In the example above that is $24,000, or 30 cents for every dollar, and the figure is fixed at signing, so it does not grow if collection takes a little longer. What you are paying for is speed and a decision based on revenue, with no collateral usually needed and no wait for tax returns and appraisals. The useful test is to set the total payback and the weekly payment against what the money will do for the business, such as stock that sells through in a busy season or a repair that keeps the doors open.
Two offers for the same amount can differ by thousands of dollars, so compare them on the total payback, the payment, how often it leaves the account and whether there is an early payoff discount. Our guide to factor rates and how an advance is priced shows how to turn any offer into those figures. New York requires standardized disclosures on commercial financing offers of up to $2,500,000, with a specific format for sales-based financing, under regulations adopted by the Department of Financial Services so that owners can compare offers side by side.
What revenue-based funding is good for
Owners choose it when timing matters and the business's strength is its sales rather than its balance sheet.
- It is quick, because the decision rests on four months of bank statements, and most applicants are funded within one to two business days of choosing an offer, some the same day.
- Approval is based on revenue, so a business with steady deposits can qualify without property to pledge or a top credit score.
- No collateral is usually required, since the funder relies on the receivables it has bought.
- The payment is set from the start, so the owner can plan around one known daily or weekly figure until the advance is finished.
- The money can go wherever the business needs it, from payroll and inventory to equipment repairs or a second location.
Those needs are common among small businesses. In the Federal Reserve Banks' 2025 Report on Employer Firms, 51% of firms said uneven cash flow was a financial challenge, and meeting operating expenses was the most common reason firms applied for financing, given by 56% of applicants. In the same survey, 7% of firms applied for a merchant cash advance.
What funders look at
Funders read your business bank statements first. They total the sales deposits for each month and look at how evenly they arrive, the average daily balance, any overdrafts or returned payments, debits to other funders and payments on loans or leases. Credit is checked too, usually with a soft pull at first, but it is one input among several, and a lower score narrows the options rather than ending them. Our guide to how to qualify for a merchant cash advance goes through each of these and the documents to have ready.
Revenue based financing for startups
Because the offer is sized on a track record of deposits, both versions of revenue-based financing need revenue already coming in. The funders we work with generally look for about a year in business and about $20,000 a month in deposits, so we mostly help established businesses. If you are not there yet, apply anyway, since some funders work with newer or smaller businesses and we will tell you plainly what is realistic. If the business is just getting started, our guide to business loans for new businesses sets out the options that fit a shorter history.
How it compares with a loan and a line of credit
An SBA or bank term loan usually costs less and is priced as an interest rate, but it asks for tax returns, a personal financial statement and often collateral, and it takes weeks rather than days. Our guide to how long it takes to get a business loan lays out the timing for each type. A line of credit suits a business that wants money on hand to draw as needed and repay only on what it uses, and our guide to the business line of credit explains how draws and payments work. Revenue-based financing fits a business that needs a lump sum within days and has the deposits to support a set payment.
How to get revenue-based financing through us
- Fill in our short application and add four months of business bank statements, either as uploads or by connecting your bank read-only.
- We send your file to the funders in our network whose requirements fit your business, and most of them prequalify from the statements and a soft pull, so getting matched does not need a hard credit pull.
- Offers come back side by side, and our team goes through the amount, the factor rate, the total payback, the payment, how often it is collected and the reconciliation and early payoff terms with you before anything is signed.
- Once you choose an offer, the funder finishes its review, and if it runs a hard pull at that stage you will know before it happens.
- Most applicants are funded within one to two business days of choosing an offer, and some the same day.
There is nothing to pay to apply or to see offers, and you are under no obligation to accept one.
Gather your last four months of business bank statements and start your application, or call us at (818) 351-0225 to talk through what your deposits can support first.
Questions about revenue-based financing
What are the downsides of revenue-based financing?
The main trade-offs are the cost in dollars and a payment that stays set. The total payback is fixed at signing, so an $80,000 advance at a 1.30 factor rate costs $24,000, which is usually more in dollars than a bank or SBA loan that takes weeks and more paperwork to arrange. The daily or weekly payment leaves the account on schedule through busy and quiet weeks alike, so it is worth sizing the advance against a usual week of deposits, and many contracts include a reconciliation clause you can ask the funder to explain before you sign.
What are some examples of revenue-based funding companies?
Revenue-based funding comes from a few kinds of providers, including specialist firms that fund software and subscription companies against recurring revenue, funds licensed by the SBA as Small Business Investment Companies, some community lenders and nonprofit loan funds, and merchant cash advance funders that buy a share of future sales from established businesses. Rather than picking one, you can send one application through us to the funders in our network and compare their offers side by side.
Is revenue-based financing a loan?
It depends on the version, because the venture style is usually written as a loan repaid from a share of revenue up to a cap, and SBA rules treat it that way, while the small business style is usually written as a purchase of future receivables, which is how a merchant cash advance is structured and why its cost is a factor rate rather than an interest rate.
How much can you get with revenue-based financing?
The amount is a multiple of your average monthly sales deposits, adjusted for how steady they are and for any advances already being paid, so a business depositing about $80,000 a month might be offered around one month of deposits. Revenue-based financing through the funders we work with runs from $5,000 to $2,000,000.
How is revenue-based financing paid back?
With the small business version, the funder collects a set payment from your business bank account each business day or each week until the agreed total has been collected, and the payment is sized from your usual deposits when you sign. With the venture version, the business pays a percentage of each month's revenue until it reaches the agreed cap.
