Article
Revenue-Based Financing: How Repayment From Sales Works
Short answer
With revenue-based financing, a provider gives you capital and you repay a fixed multiple of it (the cap, such as 1.4x) through a set percentage of monthly revenue. Payments rise and fall with sales. Like a factor rate, the cap is a price per deal, so the faster you repay, the higher the effective annual cost.
Key points
- Common with subscription software, e-commerce and other businesses with steady, trackable revenue.
- No equity is given up, but the total payback is fixed.
- $100,000 with a 1.4x cap repaid in equal monthly amounts over 18 months is about 46% APR; over 30 months, about 28%.
- Read how revenue is defined, minimum payment clauses and what happens if revenue drops.
Revenue-based financing (RBF) sits between a bank loan and selling equity. You don't give up ownership, and payments flex with your sales, but the price is fixed up front in a way that's easy to underestimate.
How it works
- Capital: the amount you receive, often sized as a multiple of monthly revenue.
- Cap (or multiple): the total you'll repay, such as 1.3x or 1.5x the capital.
- Revenue share: the percentage of each month's revenue that goes to repayment until the cap is reached.
If revenue grows, you repay faster. If it shrinks, payments shrink and the term stretches. Some contracts add a minimum monthly payment or a maximum term, which takes away part of that flexibility.
The cost depends on speed
Take $100,000 of capital with a 1.4x cap: you repay $140,000. The dollar cost is $40,000 whatever happens. The annualized cost is not fixed:
| Months to reach the cap (equal monthly payments) | Monthly payment | Estimated APR |
|---|---|---|
| 18 | about $7,778 | about 46% |
| 30 | $4,667 | about 28% |
Real payments won't be equal, because they follow revenue, but the direction holds: fast growth makes RBF expensive in APR terms, while slow repayment makes it cheaper per year but leaves the obligation around longer. Model your own case in the APR calculator using the factor-rate mode with the cap as the factor.
Questions to ask
- How is "revenue" defined: gross sales, net of refunds, including or excluding sales tax?
- Is there a minimum payment or a deadline to reach the cap?
- What triggers default, and what are the remedies?
- Is there a discount for early repayment?
- Which bank or platform data do they connect to, and what can they see?
- Do they file a UCC lien, and on what?
Who it suits
RBF fits businesses with predictable, trackable revenue and good gross margins, which can afford to share a slice of sales without starving operations. It's a poor fit for thin-margin businesses, where giving up even a small percentage of top-line revenue can wipe out profit. Compare it against a bank line or term loan priced on APR before deciding; RBF's convenience has a price.
Sources
- Federal Reserve Banks: 2026 Report on Employer Firms (Small Business Credit Survey)
- Orrick: state commercial financing disclosure laws (sales-based financing)
Checked November 9, 2026. Program rules and scoring models change; the source is the authority.