Revenue-Based Financing

Revenue-based financing (RBF) gives a business money now in exchange for a share of its future revenue. The business pays a fixed percentage of its revenue each period until it has paid a set total, called the repayment cap. There is usually no fixed monthly payment and no fixed end date.

Example: a software company receives $200,000. It agrees to pay 6% of monthly revenue until it has paid $260,000, a cap of 1.3 times the funding. In a $150,000 revenue month, it pays $9,000. In a $90,000 month, it pays $5,400. If revenue grows quickly, the cap is reached sooner. If growth stalls, repayment takes longer.

The term covers a range of products:

• Growth-stage RBF, often for software and online businesses, is usually paid monthly from reported revenue and is sometimes structured as a loan.
• Daily or weekly revenue-share products work much like a merchant cash advance (MCA) and may be structured as a purchase of receivables.

In law, the structure matters more than the label. In states such as California and New York, commercial financing disclosure laws cover "sales-based financing," meaning financing repaid as a percentage of sales or income. Many offers must show an estimated annual percentage rate. Texas also regulates commercial sales-based financing under a 2025 law.

Why it matters for lenders

RBF ties repayment to the business's real performance. That can make it a better fit than a fixed term loan for seasonal or fast-growing companies. The trade-off is uncertain timing. The provider knows the total it will collect if the business survives, but not when it will arrive.

That makes revenue data the core of both underwriting and servicing. Providers need a reliable view of revenue each period, usually through connected bank, payment or accounting data. If reported revenue is late or wrong, the payment is wrong too. Disclosure rules also require providers to estimate repayment timing using set methods.

How it works in practice

A provider funds an online retailer that connects its payment processor and bank accounts. Each month, the system pulls revenue for the period, applies the agreed percentage and schedules the ACH debit. It also tracks the running total paid against the cap.

When the retailer has a slow quarter, payments drop on their own. If the data feed breaks, the servicing team sees an exception and asks the business for statements before the debit runs. Providers that calculate payments by hand in a spreadsheet often make errors that surface later as overcharges, disputes or a cap that is passed without anyone noticing.