Revenue-based financing
Revenue-based business financing
Capital advanced against future revenue and repaid on a fixed daily or weekly schedule. It is the product behind most “fast business funding” offers. Here is how the remittance works, how it differs from a merchant cash advance and a term loan, what it costs with the arithmetic shown, and when it is the wrong tool.
What is revenue-based business financing?
Revenue-based business financing is a lump sum advanced against your future revenue and repaid through fixed daily or weekly ACH remittances from your business bank account. It is underwritten on your bank deposits rather than collateral or credit score, which is why it can fund within a day and is available from a 500 credit score. It is priced as a factor rate, from 1.08, so the total repayment is fixed at signing. It fits short, dated needs with a clear return; it is the wrong tool for long-term investment or for a business losing money at current volume.
What revenue-based financing is
Revenue-based financing is capital advanced against your business’s future revenue and repaid as a fixed daily or weekly remittance drawn by ACH from your business bank account. It is priced as a factor rate rather than an interest rate: a 1.20 factor on $50,000 means $60,000 is repaid, and that figure is fixed the day you sign.
It is the product most owners actually receive when they apply for “fast business funding”, and it sits between two things it is often confused with. A merchant cash advance is repaid as a percentage of card sales, so the remittance rises and falls with your takings. A term loan is repaid monthly over years at an interest rate. Revenue-based financing takes the underwriting of the first and the predictability of the second: underwritten on deposits, repaid on a fixed schedule.
| Revenue-based financing | Merchant cash advance | Term loan | |
|---|---|---|---|
| Underwritten on | Bank deposits | Card sales | Credit, financials, time in business |
| Repaid | Fixed daily or weekly ACH | Percentage of card receipts | Fixed monthly payment |
| Priced as | Factor rate, from 1.08 | Factor rate, from 1.08 | Interest, from 9% |
| Speed | Same day to 24 hours | Same day | Days |
| Credit | From 500 | From 500 | Generally 680+ |
| Early payoff | Total is fixed; some agreements discount | Total is fixed | Interest stops accruing |
How the remittance actually works
The funder advances a lump sum. You repay a fixed amount — say $476 a day — every business day until the total is repaid. The number of payments is set at signing: total repayment divided by the daily amount. If revenue dips, the remittance does not, which is the honest difference from a true percentage-of-sales advance and the reason you should size the remittance against your slow month, not your average one.
Some agreements let you request a temporary reduction if revenue falls sharply. Ask whether yours does, and what evidence the funder wants, before you need it.
Who qualifies
- Time in business: generally six months or more.
- Deposits: consistent monthly business deposits. Consistency matters more than size; a specialist reads average daily balance, number of negative days and existing obligations.
- Bank account: a business account in the entity’s name, with three months of history Typically 3 months; some states require 4.
- Credit: read, not gating. Revenue-based financing is available from a 500 score; a stronger score usually improves the factor rather than the decision.
- Existing positions: every open advance disclosed. Two or more may point you toward consolidation rather than a new position.
What you will be asked for
- Last 3 months of business bank statements Some states require 4 months.
- A one-page application with ownership and entity details.
- Voided cheque or bank letter for the remittance.
- For larger amounts: a read-only bank connection, and sometimes a recent tax return.
What it costs, with the arithmetic shown
The factor below is a placeholder chosen to make the example legible, not a quote; your own factor is set on your file.
- Advance: $50,000 at a 1.20 factor. Total repayment: $60,000.
- Term: six months, about 126 business days. Daily remittance: roughly $476.
- Cost of capital: $10,000, fixed at signing. Repaying in four months instead of six does not reduce it unless the agreement includes an early-payoff discount.
Because the total is fixed and the term is short, the equivalent annual rate is far higher than the “20 per cent” the factor suggests. Factor rate vs APR works the conversion through with real numbers. The right way to judge an offer is still the plain one: is $10,000 of cost worth what $50,000 will do in the business over the next six months?
The Federal Reserve’s 2025 Small Business Credit Survey found 60 per cent of online-lender borrowers reported higher-than-expected costs, against 32 per cent at large banks.1 The gap is mostly a disclosure gap. Ask for the amount funded, the total repayment and the remittance schedule on one page before you sign; ten-plus states now require providers to give you exactly that.2
Where it fits, and where it does not
| Works well for | Wrong tool for |
|---|---|
| Inventory bought at a discount that pays for the capital | Covering losses in a business that is not profitable at current volume |
| Mobilising a signed contract that pays in 60 days | Long-term investment that should be financed over years |
| Bridging a known seasonal dip with a dated recovery | Businesses with fewer than six months of deposits |
| Owners who cannot clear a bank or SBA credit bar this year | Owners who can — a term loan or line of credit is cheaper |
One boundary is not negotiable. The FTC won a $20.3 million judgment in February 2024 against a financing operator over misrepresented funding and collection amounts, unauthorised withdrawals and the use of confessions of judgment to seize assets.3 If an offer asks you to sign a confession of judgment, or the figures move between the term sheet and the agreement, walk away.
Alternatives worth pricing
- A business line of credit if you need repeatable access rather than one lump sum.
- Receivables financing if the cash gap is created by customers paying slowly.
- Equipment financing if the purchase is a machine or vehicle — the asset is the collateral, so the rate is lower.
- A term loan or SBA loan if your credit and time in business clear the bar and you can wait.
Common questions
Is revenue-based financing a loan?
Legally it is usually structured as a purchase of future receivables rather than a loan, which is why it is priced as a factor rate and why the total repayment is fixed at signing. Practically, you receive a lump sum and repay more than you received on a schedule, so treat the cost with the same seriousness you would give a loan.
How is it different from a merchant cash advance?
A merchant cash advance is repaid as a percentage of your card sales, so the remittance moves with your takings. Revenue-based financing is repaid as a fixed daily or weekly ACH amount regardless of that day’s revenue. The underwriting is similar; the repayment shape is different.
What happens if my revenue drops?
The remittance stays fixed unless your agreement includes a reduction clause and you invoke it. That is the main risk of the product, and the reason to size the remittance against your slow month and to ask about reductions before you sign.
Can I pay it off early?
You can, but the total repayment is fixed, so early payoff does not automatically reduce the cost. Some funders offer a discount for early payoff; ask for it in writing.
Will it affect my credit?
Applying is a soft inquiry. Revenue-based financing is generally not reported to the consumer credit bureaus, so on-time repayment does not build your personal score either. A hard pull only happens if you move to a term or SBA product.
Sources
- 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey — Federal Reserve Banks, 3 March 2026
- State Commercial Financing Disclosure Laws — Venable LLP, March 2026
- Court Enters $20.3 Million Judgment in FTC Case Against Merchant Cash Advance Operator Jonathan Braun — Federal Trade Commission, 14 February 2024
See what you qualify for
One application, about five minutes, soft pull only. A funding specialist comes back with the offers you qualify for — and explains every term before you sign.