Revenue-based financing (RBF) gives your business a lump sum of capital in exchange for a percentage of future monthly revenue until the total repayment amount is reached. Unlike a term loan with fixed payments, your payments adjust with your revenue — lower months mean lower payments.
Definition
Revenue-based financing (also: RBF): Capital repaid as a percentage of future revenue until a set total is reached. Unlike a term loan's fixed payments, payments adjust with your revenue, so slower months mean lower payments.
See all business financing definitions| Financing type | Business Financing |
|---|---|
| Typical amounts | Term loans $25K–$2M; equipment financing $10K–$500K |
| Decision time | As fast as 24 hours |
| Credit | All credit profiles considered; soft credit pull to start |
| Cost to apply | Zero cost to apply |
| Who we are | A business financing broker. We compare offers from our lender network; we are not a direct lender. |
In detail
The lender agrees on a total payback amount (for example, $130,000 on a $100,000 advance — a 1.3x factor rate). Each month, a fixed percentage of your gross revenue (typically 5–15%) is automatically collected until the full amount is repaid. If revenue drops, payments drop. If revenue increases, repayment happens faster.
In detail
RBF focuses on monthly revenue consistency rather than credit score. Most lenders require $10,000–$15,000/month in gross revenue for at least 6 months. Credit score requirements start around 550 FICO — the most flexible of any product. Time in business is typically 6 months minimum.
In detail
RBF is ideal when your business has strong monthly revenue but inconsistent or seasonal cash flow, when you have challenged credit but solid bank deposits, or when you need capital quickly without extensive documentation. It is not the cheapest product — factor rates of 1.15–1.5x mean higher effective APRs — but it is the most accessible for businesses with revenue-over-credit profiles.
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Revenue-based financing
Working capital vs. term loan
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A factor rate is a multiplier applied to the advance amount to determine total repayment. A 1.3 factor rate on a $100,000 advance means you repay $130,000 total. Unlike interest, factor rates do not compound — the total is fixed regardless of how long repayment takes. This makes early repayment less beneficial than with traditional interest-bearing loans.
They are similar. Merchant cash advances (MCAs) are traditionally linked to credit card processing volume. Revenue-based financing is a broader category that includes bank deposit-based structures. Both use factor rates and percentage-of-revenue repayment. Modern RBF products are generally considered more transparent than old-style MCAs.
You can repay the full remaining balance early, but because the repayment amount is fixed (via the factor rate), early payoff does not save on interest the way it would on a traditional loan. Some providers offer a small discount for early settlement — always ask.
Written by lendfloCapital Editorial Team · Last updated
lendfloCapital is a business financing broker, not a lender. This page is general information, not financial, legal or tax advice. Rates, amounts and terms depend on the lender and your business.
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