With revenue-based financing, you receive a lump sum and pay back a set percentage of revenue each period until you reach a repayment cap. There is usually no fixed term: strong months shorten the deal and weak months stretch it.
It is close in design to a merchant cash advance. New York and Virginia define sales-based financing broadly enough to cover both, because payments move with sales. In practice, revenue-based financing is more often used by businesses with recurring revenue, such as subscriptions or e-commerce, and often collects monthly rather than daily.
Example: $100,000 with a 1.40 repayment cap means you repay $140,000. At 8% of revenue, a $150,000 month sends $12,000 and a $90,000 month sends $7,200. At an average of $125,000 a month, the deal runs 14 months.
Because the cost is fixed in dollars, faster repayment raises the effective annual rate.
Sources
- N.Y. Financial Services Law § 801. Definitions — New York State Senate (checked 2026-09-30)
- Code of Virginia § 6.2-2228 (definitions, sales-based financing) — Virginia General Assembly (checked 2026-09-30)