What is revenue-based financing and how does it work?

How revenue-based financing works

With revenue-based financing you receive capital upfront and repay it as a set share of your ongoing revenue — typically pulled daily or weekly from your bank account or card settlements. Because repayment flexes with sales, it cushions slow weeks better than a fixed loan payment. Underwriting focuses on your recent deposit history and revenue consistency, so businesses that can't yet clear a bank or SBA credit bar often still qualify.

What it costs: factor rate, not interest rate

RBF and merchant cash advances are usually priced with a factor rate (for example 1.2–1.5) rather than an APR, so the total payback is the advance multiplied by that factor. Speed and flexible qualification come at a higher effective cost than a bank loan, so revenue-based financing fits time-sensitive needs — covering a large order, bridging a receivables gap — rather than long-term, low-cost capital. The CFPB notes that comparing the total cost of capital, not just the rate label, is the key to evaluating any financing offer.

Who it fits

• Businesses with steady card or bank-account revenue but a lower credit score
• Time-sensitive needs where funding speed matters more than the lowest rate
• Seasonal or cash-flow-variable businesses that want payments to flex with sales
• Owners who don't want to pledge specific collateral the way a term loan or SBA loan may require