Glossary

Revenue-based financing

Capital repaid as a share of revenue until a cap.

Capital repaid as a fixed percentage of monthly revenue until a stated multiple of the amount (the cap) is repaid; the term varies with revenue. Marketed to growth businesses as an alternative to advances and equity; total cost can still be high, and faster growth raises the annualized cost. The cost paradox and who it fits.

How it appears in a contract

An agreement stating the amount, the cap (e.g. 1.3×), the revenue share, any minimum payments, and reporting requirements.

Worked example

$100,000 at a hypothetical 1.3× cap and 8% revenue share: $130,000 repaid over however many months $130,000 equals 8% of revenue.

Illustrative figures on stated assumptions; not quotes.

What to ask

• Is there a minimum monthly payment even if revenue falls?
• Does the cap step up over time?
• What reporting or bank access is required?

Related terms

Merchant cash advance · Factor rate · APR (annual percentage rate) · Business purpose · all terms