Revenue Based Funding
A loan where repayments are tied to a fixed percentage of your monthly revenue. Payments rise when revenue is high and fall when it drops.
What Is Revenue Based Funding?
Revenue Based Funding (RBF)-also known as a revenue loan or royalty financing-is a loan where repayments are tied to a fixed percentage of your business's monthly revenue instead of a fixed amount. This means payments rise when revenue is high and fall when it drops.
RBF is typically structured as a term loan. Drawdowns sometimes happen over multiple years so that interest starts accruing only when funds are actually needed. Repayments generally include both principal and interest and are calculated off prior-month or quarter revenue.
Repayment stops when one of these happens: a predetermined multiple of the original loan is reached, a target internal rate of return (IRR) is achieved, or a terminal date arrives.
Benefits of Revenue Based Funding
Non-Dilutive
No equity stake given away, no board seats required. You retain full ownership of your business.
Usually No Collateral
In many cases, no collateral is needed and no personal guarantee is required.
Fewer Restrictions
Fewer restrictive covenants compared to traditional debt financing.
Flexible Payments
No minimum principal repayments monthly-repayments flex with your revenue.
No VC Required
Doesn't require being VC-backed or having a formal valuation.
Who Qualifies?
Here's what lenders typically look for in RBF candidates:
- Minimum revenue of $250,000/month in some cases
- Recurring revenue or subscription-style business preferred
- Historical and projected revenue growth
- Healthy gross margins
- EBITDA should be positive or close to it
- Minimal existing debt
Typical Terms & Provisions
Loan Amount
Typically capped at no more than one-third of annualized revenue. Sizes range from $50,000 to $5,000,000+.
Term Length
Usually 3–5 years.
Payment Percentage
Between 1% to 3% of monthly revenue in many cases, sometimes up to 8%.
Payment Cap
Lenders typically aim to receive 1.5× to 2.5× the original amount lent.
Time to Funding
Usually less than 45 days.
Industries That Qualify
Revenue Based Funding works well for businesses in these industries:
- Technology & SaaS
- E-commerce
- Oil & Gas
- Food & Beverage
- Fuel/Food Distribution
- Truck Stops
Things to Consider
- Must be generating revenue: A pre-revenue company generally doesn't qualify for RBF.
- Margins matter: Strong gross margins are important since repayments take a slice of revenue. Low margins could hurt profitability.
- Cost can vary: Because there's no fixed interest rate, the total cost can be hard to predict and may require modeling.
- Upfront fees: May include legal, accounting, origination, and broker fees.
Get Revenue Based Funding
Apply now and receive funding that flexes with your business performance.