In short
- Revenue-based financing gives a business money now, repaid with a set share of future sales or revenue until an agreed total is paid back.
- Payments go up in strong months and down in slow ones. The total you repay is set when you sign.
- It is close to a merchant cash advance and very different from a term loan with fixed payments. Some US states group both under one legal name: sales-based financing.
- celerfunding.com is a business funding marketplace and referral service, not a lender. No credit pull to look; a lender may check your credit later.
Revenue-based financing is business funding that you repay with a set share of your future sales or revenue until an agreed total amount has been paid back. Your payments rise when sales are strong and fall when they slow down, but the total you owe does not change. celerfunding.com is a business funding marketplace that matches businesses in Canada and the US with funders, including providers of revenue-based financing; we are a referral service, not a lender, and each funder makes its own decision and sets its own terms.
What is revenue-based financing?
With revenue-based financing, a funder gives your business a lump sum today. In return, you agree to pay the funder a fixed share of what comes in until you have repaid a total amount written into the contract. That total is the money you received plus the funder's cost. There is usually no fixed monthly payment and no fixed end date: how long it takes depends on how much you sell.
The law has a name for this kind of deal. Virginia, for example, defines sales-based financing as a transaction repaid "over time, as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the volume of sales made or revenue received", and says the term also covers deals with a fixed payment that is later adjusted (a "true-up") to match a share of sales or revenue (Code of Virginia, section 6.2-2228). Providers often market it as revenue-based financing, sales-based financing or revenue share; read the contract to see which one you are being offered.
It is not equity. You do not give up ownership of your business, and the funder does not share in your profits once the agreed total is paid.
How repayment works
- You agree on three things up front: the amount you receive, the total amount you will repay, and the share of revenue that goes to the funder.
- Payments follow your sales. The funder collects its share daily, weekly or monthly, often by a debit from your bank account or a split of card or online payouts. A strong month pays down more; a slow month pays down less.
- Some deals use a fixed payment with a true-up. You pay a set amount, and the funder adjusts it on request or on a schedule so it matches the agreed share of what you actually took in. Ask how often the true-up happens and what you must send to get one.
- It ends when the total is paid. Once the agreed total is repaid, the payments stop. Paying back sooner does not always lower the total, so ask about early payoff before you sign.
Because the payment moves with sales, the real yearly cost depends on how quickly you repay. The same total cost spread over a shorter time is more expensive on a yearly basis. Our guide to factor rate vs APR shows why, and the factor rate calculator lets you test your own offer.
Revenue-based financing vs a merchant cash advance vs a term loan
Revenue-based financing and a merchant cash advance are close cousins. US federal rules describe a merchant cash advance as an agreement where a small business gets a lump sum "in exchange for the right to receive a percentage of the small business's future sales or income up to a ceiling amount" (CFPB: Regulation B, section 1002.104). That is very close to the revenue-based model, and state laws such as Virginia's group both under sales-based financing. In practice, the labels are used loosely; the contract terms matter more than the name.
| Revenue-based financing | Merchant cash advance | Term loan | |
|---|---|---|---|
| What you get | A lump sum | A lump sum, usually framed as a purchase of future sales | A loan amount |
| How you repay | A share of revenue until a set total is paid | A share of sales (often card sales or deposits) until a set total is paid | Fixed payments on a schedule |
| Payment in a slow month | Goes down | Goes down, or is adjusted through a true-up | Stays the same |
| End date | When the total is repaid | When the total is repaid | Set in the contract |
| How cost is shown | Total repayment or a multiple of the amount received | A factor rate | An interest rate, often with an APR |
For more on the advance side, the merchant cash advance page has a "Straight answers" section on whether an advance is a good idea, how it compares with a loan, and the risks of stacking. If you want a fixed payment you can plan around, compare a term loan or a line of credit.
Who revenue-based financing can suit
- Businesses with steady, trackable revenue that funders can see in bank deposits, card processing or online sales reports, such as online stores, restaurants, salons and spas and gyms and studios.
- Seasonal businesses that would struggle with the same payment every month. Our guide to seasonal business funding covers other options too.
- Owners who need a short-term amount for a clear use that should bring in revenue, such as inventory, marketing or a busy-season push.
- Businesses that do not fit a bank's rules because of a short history or thin profit on paper, but have consistent sales.
It may not suit you if your margins are thin, if revenue is very uneven or falling, if you need money for a long-term project that will take years to pay off, or if you already carry other advances. In those cases a term loan, equipment financing or a government-backed loan is often worth checking first.
Risks and what to ask before you sign
A payment that follows sales sounds safe, but revenue-based financing can still strain cash flow, and it often costs more than a bank loan. Ask every funder these questions and get the answers in writing:
- What is the total amount I will repay? Compare that number, not just the share of revenue.
- What share of revenue do you collect, and on what? Gross deposits, card sales only, or all revenue? Are refunds and transfers between your own accounts left out?
- How often do you collect, and how? Daily, weekly or monthly; bank debit or payout split.
- Is there a true-up, and how do I ask for one? What paperwork do you need and how often can I request it?
- What fees are added? Origination, underwriting, wire or bank fees reduce what you actually receive.
- Is there a discount for paying early? If not, paying faster raises the yearly cost.
- Am I signing personally, and what happens if sales stop? Ask whether you, as the owner, are on the hook if the business cannot pay. Read the default section, not just the summary.
- Can I take other financing while this is open? Taking a second advance on top of the first (stacking) is a common way to get into trouble; see our guide to MCA stacking.
Some US states require written cost disclosures for this kind of financing, and Virginia has a full chapter of its code on sales-based financing providers. Whatever your location, ask for the cost in writing and use our guide on how to read a business loan offer to compare it with other offers. This page is general information, not legal, tax or financial advice.
Walk away from any offer that pushes you to sign the same day, hides the total repayment, or promises approval before anyone has looked at your file.
How celerfunding.com can help
celerfunding.com is a business funding marketplace and referral service, not a lender. You tell us how much you need, what it is for, how long you have been in business and roughly what comes in each month. There is no credit pull to look at your options; if you choose to go ahead with a funder, that funder may check your credit later. We point you to the types of funders in our network that review files like yours, including options other than revenue-based financing when they fit better. It is free for the business; funders may pay us a referral fee. This may affect which offers you see. Funders make every credit decision and set every term, and approval and timing are never certain. Read more about what a business funding marketplace is.
Ready to see whether revenue-based financing or another option fits? Start a free application.