Revenue-based financing ties repayment directly to how the business actually performs. Instead of a fixed payment, the provider collects an agreed percentage of ongoing revenue until a total repayment amount is reached.
This structure appeals to businesses with variable income : retail, hospitality, ecommerce, seasonal services : because slow weeks mean smaller payments.
How it generally works
You receive an advance of funding now and agree to repay a larger total amount over time. The provider collects an agreed percentage of daily, weekly, or monthly revenue until the total is satisfied.
Because the percentage is fixed rather than the payment amount, a strong month pays the balance down faster and a slow month costs less that period.
Common uses
- Inventory purchases ahead of peak seasons
- Marketing and customer acquisition spend
- Managing revenue volatility in seasonal industries
- Growth initiatives where fixed payments would strain cash flow
- Short-term opportunities that require fast access to funds
Qualification factors providers commonly review
- Consistent monthly revenue, usually over recent months
- Time in business, often six months or more
- Bank account deposits and card sales volume where relevant
- Industry and revenue predictability
- Existing funding obligations
Potential advantages and trade-offs
Advantages: payments flex with revenue, qualification often emphasizes cash flow over credit, and funding can move quickly.
Trade-offs: the total repayment amount is typically higher than the amount received, and remitting a percentage of revenue daily or weekly requires disciplined cash management.
How repayment is typically structured
A fixed percentage of actual revenue, collected frequently, until an agreed total is repaid. Review the exact percentage, the total repayment figure, and how collections are processed before accepting an offer.