Revenue-based financing, with the cap in dollars

The full guide

Repayment tied to revenue, capped in dollars

With revenue-based financing, the funder advances you money and takes an agreed percentage of revenue until you have paid back a set total. That total is the repayment cap. One lender we track gives the example of a 1.4x cap: borrow $100,000 and you repay $140,000. The same lender says SaaS payments typically run from 3% to 10% of monthly revenue over an estimated 12 to 24 months.

Because payments follow revenue, the schedule is not fixed. An e-commerce funder illustrates it with 10% of daily revenue: a $10,000 sales day sends $1,000 to the funder, and a $4,000 day sends $400. There is no fixed end date on a calendar. You are done when the cap is paid.

The cap is the whole price. It works like a factor rate: a dollar figure you know on day 1. What you do not know is how long repayment will take, and that decides the estimated APR.

The share sets the speed. A higher percentage pays the cap off sooner, which feels good but raises the annualized cost. A lower percentage stretches repayment and lowers it. When you compare offers, compare the cap and the share together, never one without the other. Our guide to what revenue-based financing is covers the variations.

Who uses it: SaaS and e-commerce

SaaS companies

Lenders in this space look at monthly recurring revenue, annual recurring revenue, churn and gross margin, according to one lender we track. A company with predictable subscriptions and low churn can support a revenue share that would be risky for a business with one-off sales. Founders use it to fund growth they expect to show up in revenue within 1 to 2 years.

E-commerce brands

One e-commerce funder says offers are typically sized at 1 to 2 times average monthly revenue and describes its typical customer as an established brand with at least $10,000 a month in sales and 6 months of history. A broker we track describes a similar product for Shopify and Amazon sellers repaid from a 5% to 15% share of daily sales. If you sell online, our e-commerce funding page covers seasonal stock and platform payout timing.

How RBF differs from an MCA

Several funders we track use "revenue-based financing" for a deposit-based advance: a purchase of future receivables repaid by daily or weekly debits, priced with a factor rate. That is a merchant cash advance under another name, and it should carry the same reconciliation right. The table shows how the 2 usually compare.

Both fall under state disclosure laws in some states. New York's rules cover sales-based financing of $2.5 million or less, and California's cover merchant cash advances, so providers there must show an annual percentage rate on the offer.

The cap is fixed, the APR is not

The $30,000 never moves. Only the time you hold the money changes. That is the trade: RBF protects you in a bad stretch, when payments shrink and the effective price falls, and charges you more in a good one, when you pay the cap off quickly.

Check the share against your margin too. The funder takes its percentage from revenue, before you pay for goods, shipping or ads. At a 10% share and a 40% gross margin, 25% of your gross profit goes to repayment until the cap is met.

Run your own forecast before you sign. If you expect revenue to jump right after funding, compare the cap with a fixed-rate loan, which would cost less if you paid it early. The offer decoder shows the estimated APR at the payment speed you expect.

Share, cap and revenue: what to pin down

• Which revenue? Gross sales, bank deposits, or platform payouts after fees and refunds. The base changes how much you pay.
• Is there a minimum payment or a deadline? A floor payment or a date by which the cap must be paid makes the deal behave like a loan.
• What fees come off at funding? A fee taken from the advance raises the real cost, because the cap stays the same.
• Is there an early payoff discount? One funder we track offers a discount for completing its RBF early, without publishing the amount.
• How does the funder see your revenue? Some programs read it straight from your bank or sales platform. Ask what happens if that connection breaks or a payout is delayed.
• Is there a UCC-1 filing? A lien on receivables or all assets can complicate the next financing you need.
• What does the guarantee cover? One funder we track states that the owner is not personally responsible if the business has no revenue, unless the owner kept receipts from it.

Our guide on how to read an MCA contract applies to deposit-based RBF clause by clause. When you apply through Openbook, we show every offer with its cap, share, estimated term, cost in dollars and estimated APR.

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