Revenue-based financing (RBF) sits between a merchant cash advance and a term loan. Like an MCA, repayment scales with revenue. Unlike most MCAs, RBF is typically structured as a loan with disclosed interest, longer remit periods, and lower effective annualized costs. It's most common in SaaS, e-commerce, and subscription businesses where revenue is recurring and predictable.
How RBF is structured
Most RBF agreements advance a lump sum and collect a fixed percentage of monthly revenue (commonly 2%–8%) until the borrower has paid back a multiple of the original advance — typically 1.2x–1.5x. There is no fixed maturity date; the loan ends when the cap is paid.
Many — though not all — RBF products are originated as loans rather than purchases of receivables, which means they may include APR-equivalent disclosures and a defined cap on total payback. Structure varies meaningfully by funder, and some agreements marketed as RBF are functionally closer to MCAs. Read the contract to confirm whether the product is structured as a loan or a receivables purchase.
Why predictable revenue matters
RBF underwriters almost always require a connected revenue source — Stripe, Shopify, QuickBooks, a payment processor — so they can verify trailing-12-month revenue and seasonality. The advance amount is usually capped at 4×–8× monthly revenue, and the remit percentage is set so projected payback runs 12–36 months.
Businesses with lumpy or seasonal revenue can still qualify but typically receive smaller advances or larger remit percentages to compensate.
Cost vs. equity dilution
RBF is most often compared to dilutive equity capital, not to bank debt. For a high-growth SaaS or DTC business, the question is usually: take a 1.3x cap on $500K of growth capital, or sell 5% of the company to raise the same amount? The math depends on growth rate, exit value, and how soon the cash is needed.
Compared to a bank line, RBF is more expensive in absolute terms but doesn't require collateral or 2+ years of operating history.
Where RBF doesn't fit
RBF doesn't fit asset-heavy businesses that need fixed-rate term debt for equipment or real estate. It doesn't fit owners who want to lock in a payment they can budget around — RBF payments float with revenue. And it usually doesn't fit very early-stage businesses without recurring revenue (most RBF lenders want at least $10K–$25K in monthly recurring revenue).
Sources
Editorial note: This article is general information about how small-business lending products work. It is not financial, legal, or tax advice for any specific borrower. Loan terms, eligibility, and rates vary by lender, borrower profile, and current market conditions, and the specific facts of your business will determine which products and structures actually fit. Consult a CPA, attorney, or SBA-approved lender before making decisions that affect your business.