Revenue based financing

What is revenue based financing?

A funder advances cash and takes a share of your monthly revenue until a total is reached. If you take $200,000 at a 1.3x cap with a 8% revenue share, you repay $260,000, and each month you send 8% of whatever you billed. Strong months repay faster, slow months slower, and the funder's return is fixed at $60,000 regardless.

It grew up around software and ecommerce companies that have predictable revenue but not the profit or collateral banks need. Online platforms connect to your payment processor and accounting data to size the advance. Compared with a merchant cash advance, it is larger, slower, cheaper and monthly rather than daily.

Who qualifies for revenue based financing?

Funders want revenue that is recurring or at least predictable: subscriptions, repeat ecommerce customers, long term contracts. Most want six to twelve months of history, $15,000 to $25,000 or more a month in revenue, and gross margins of 40% or higher so the revenue share does not consume the profit. Owner credit matters less than the data.

• Declined most often: project based businesses with lumpy revenue, margins under 30%, revenue falling month over month, and businesses that cannot connect bank and processor data.
• Startups with revenue but no profit are a natural fit; see financing for software and tech startups.

What does revenue based financing really cost?

A typical example: you take $200,000 at a 1.3x cap, so $260,000 to repay, with an 8% revenue share. At $150,000 a month in revenue, you send $12,000 a month and finish in about 22 months. The $60,000 fee over that period works out to roughly 29% APR.

Here is the catch: growth makes it more expensive. If revenue climbs and you repay in 15 months, the same $60,000 fee is closer to 40% APR. Funders sometimes add an origination fee of 1% to 3%. Convert the offer to APR with our guide on APR versus factor rate, and ask what happens to the cap if you prepay.

How do you qualify, and what documents do you need?

Most funders ask you to connect your bank account, payment processor, ecommerce platform or subscription billing system, plus your accounting software. From that they pull revenue history, churn, margins and cash balance. You will also provide formation documents, an ID, and for larger amounts a recent tax return and a cap table or ownership summary.

Our document checklist lists the standard items. What moves the offer is clean data: consistent monthly revenue, low refund rates, and a bank balance that could absorb a slow month. Reconcile your books before you connect them, because the funder reads them directly.

How long does revenue based financing take?

Online platforms that read your data directly can issue an offer in one to three days and fund inside a week. Funders that underwrite manually, especially above $500,000, typically take two to four weeks and may ask for a call and a financial model.

Renewals are faster. Once a funder has your data connected, a second advance is often approved in days, which is how many businesses use the product: a rolling source of growth capital refilled as the previous advance is repaid. See how long business loans take for other products.

When should you choose something else?

Choose a line of credit if you qualify, because paying interest only on what you draw is far cheaper than a fixed cap. Choose venture debt if you are venture backed and need over $1 million; the rate is lower and the term longer. Choose a term loan if your business is profitable enough to pass bank underwriting.

Avoid revenue based financing if you plan to grow fast and prepay. The cap is fixed, so quick repayment pushes the APR up, and a product that looked like 25% can end up costing 50% a year.

How do you apply for revenue based financing?

Apply once on this site and your application reaches revenue based funders alongside lines of credit, term lenders and venture debt providers that fit your stage, so you can compare the cap against an interest rate. It is free for your business, and we are paid the same whichever lender you choose. Or ask your AI assistant to apply through our MCP server: it reads your financials, fills the application and submits it.