Revenue Based Financing
Revenue-based financing (RBF) is a way to raise capital without selling equity: an investor advances cash, and the business repays it with a fixed percentage of its future revenue until it has paid back an agreed total, usually 1.2 to 3 times the amount advanced. Payments rise and fall with revenue, so there is no fixed monthly payment and no accruing interest.
- Minimum revenue
- $10K MRR
- Offer
- ~24 hours
- Equity & warrants
- None
- Board seats
- None
- Personal guarantee
- None
Key takeaways
- Repayment is a share of revenue, typically 1% to 15% of monthly revenue according to NerdWallet; Shopify puts the range at 1% to 25%.
- The total you repay is capped, usually at 1.2 to 3 times the advance, according to both NerdWallet and Shopify.
- Investors generally expect repayment within 1 to 5 years, according to Wikipedia, and faster revenue growth reaches the cap sooner.
- In Founderpath's worked example, a $300K advance with a $450,000 cap costs 25.5% a year (annualised IRR) at flat revenue and 38.0% at 4% monthly growth, because the same total is repaid sooner.
- California (10 CCR § 900) and New York (Financial Services Law § 801) both define "sales-based financing" as financing repaid as a percentage of sales or revenue.
What Is Revenue Based Financing?
Revenue-based financing is also called royalty financing or royalty-based financing. It sits between a bank loan, which typically needs collateral, and venture capital, which costs a share of the company (Wikipedia). Because the investor is repaid from revenue, providers underwrite the revenue itself and are less likely to rely on personal credit, collateral or time in business (NerdWallet).
The defining feature is that payments move with revenue. A slow month means a smaller payment and a strong month repays faster. A term loan works the other way: the payment is fixed whatever revenue does.
Not everyone uses the label the same way. Some lenders, Founderpath among them, apply it to capital sized against recurring revenue but repaid in fixed monthly installments. Before you compare offers, ask each provider whether its contract takes a share of revenue or a fixed payment, because the two behave very differently when growth speeds up or slows down.
How Does Revenue Based Financing Work?
For a revenue-share deal, start with three numbers: the advance, the revenue share and the repayment cap. Also check any maturity date or minimum payment in the contract, because revenue decides how quickly you reach the cap.
The advance
The revenue share
The repayment cap
Each month you pay the agreed share of that month’s revenue, so the payment rises and falls with your sales. Investors generally expect repayment within 1 to 5 years (Wikipedia), and some have no fixed end date at all (NerdWallet).
The price is the cap, not an interest rate. That makes the headline cost easy to read and the annual cost easy to miss: the cap is fixed but the time to reach it is not, so the faster you grow, the sooner you pay the same total and the higher the cost per year. The worked example below puts numbers on this.
Guarantees, liens and whether it counts as a loan
Many providers state that they need no personal guarantee (Shopify), and RBF is not normally backed by a founder’s personal assets (Wikipedia). Security still varies by contract: some providers, Founderpath among them, take a lien on business assets. Read the security clause, not the marketing page.
Legal treatment depends on the contract and the state. California and New York both define “sales-based financing” as financing repaid as a percentage of sales or revenue, with payments that rise and fall with volume, and cover it in their commercial financing rules (10 CCR § 900, N.Y. Fin. Serv. Law § 801). Whether a particular agreement is a loan is a separate question. New York courts weigh whether payments reconcile to actual revenue, whether the term is finite and whether the funder has recourse if the business goes bankrupt (Freiberger Haber). In In re Kossoff, a bankruptcy court treated 19 merchant cash advance agreements as loans despite their labels (Troutman Pepper Locke). If the distinction matters to you, have a lawyer read the agreement.
Revenue Based Financing Example
A SaaS company with $100K of monthly revenue takes a $300K advance. It pays 10% of each month's revenue until it reaches a 1.5x cap, so it owes $450,000 in total. Here is how long that takes, and what it costs per year, at three growth rates.
| Revenue path | First monthly payment | Months to repay | Total repaid | Annualised cost (IRR) |
|---|---|---|---|---|
| Flat revenue | $10,000 | 45 | $450,000 | 25.5% |
| 2% monthly growth | $10,000 | 33 | $450,000 | 32.2% |
| 4% monthly growth | $10,000 | 27 | $450,000 | 38.0% |
The total never changes. Growth only changes how fast you pay it: the same $150,000 fee paid over 27 months instead of 45 months is a higher annual rate. So compare offers on the annualised cost at the growth rate you actually expect, not on the cap alone, and use the money for spend that pays back quickly enough to cover it.
How we calculated this: the inputs are illustrative assumptions inside the published ranges above, not any provider's quote. Revenue grows at the stated monthly rate from the first payment, and the final payment is whatever is left of the cap. Annualised cost is the internal rate of return of the monthly payments against the advance, compounded to a year. It is not an APR and includes no fees.
“This is an incredible metric. You should use debt for this [a marketing program returning $1.50 per $1] because it's predictable, it's short term… Second one: cash is tight and you're worried about next payroll. I put this in the bucket of bad use of debt.”
Where Revenue Financing Products Differ
Founderpath's revenue financing is sized against recurring revenue, like RBF, but it is repaid in fixed monthly installments rather than a share of revenue.
It is structured as a receivables purchase: Founderpath buys a block of future subscription revenue at a discount, from 7% a year, and you repay it in equal monthly installments over the term in your offer (product page, as of October 2026). The total is the cash advanced divided by (1 minus the annual discount times the months divided by 12), the formula in our published receivables purchase workbook. For the same $300K at 7%:
| Term | Monthly payment | Total repaid | Annualised cost (IRR) |
|---|---|---|---|
| 24 months | $14,535 | $348,837 | 16.0% |
| 36 months | $10,549 | $379,747 | 17.2% |
These rows and the revenue-share example above use different structures and horizons, so they are not a like-for-like quote and show no saving. Whoever you talk to, Founderpath included, ask for the total repayment and the annualised cost at your expected growth rate.
Which structure fits
Revenue share
Fixed monthly payments
Founderpath’s terms
Founderpath states on its revenue financing page, as of October 2026:
No equity, no warrants and no board seats.
No full personal guarantee, and a lien on business assets only.
Early repayment at any time, which generally saves the remaining discount, with no prepayment penalty.
Capital typically up to $1.5M per round.
On eligibility, our entry guidance states $10K MRR (about $120K ARR), while the revenue financing page targets companies of roughly $1M to $3M ARR, as of October 2026. Connecting your data shows which applies to you.
Revenue Based Financing vs Other Funding Options
The table compares revenue-based financing with a fixed-payment version of it, venture capital and a bank loan. The biggest differences are what happens to your payment in a slow month and what faster growth does to your cost.
| Category | Revenue-based financing (revenue share) | Fixed-payment revenue financing | Venture capital | Bank term loan |
|---|---|---|---|---|
| What it costs | A repayment cap, typically 1.2x-3x the advance | A discount on the revenue purchased (Founderpath states from 7% a year, as of October 2026) | A share of the company | Interest, plus any fees |
| How you repay | A fixed percentage of monthly revenue until the cap is paid | Equal monthly installments over the agreed term | No scheduled repayment; investors typically seek returns through an exit | Scheduled payments of principal and interest |
| Payment in a slow month | Falls with revenue | Unchanged | None | Unchanged |
| Effect of faster growth | Repaid sooner, so the annual cost rises | No change to the cost | If growth raises the company’s value, both your stake and the share you sold are worth more | No change to the cost |
| Ownership and control | No equity given up | No equity given up | Equity sold; investors usually gain governance rights | No equity given up; covenants may apply |
| What the provider looks at | Revenue and its predictability | Recurring revenue, retention and margins | Growth potential, market and team | Credit history, cash flow and collateral |
Founderpath's rate is as stated on its revenue financing page as of October 2026. The other columns describe each structure in general, not any one provider's terms.
Detailed Comparisons
Comparing named providers? These pages set Founderpath's terms next to each one, with dated sources.
Is Revenue Based Financing Right for You?
It suits companies whose revenue can carry the payments and whose spending pays back quickly. It does not replace equity for a company without revenue.
Good fit
- Recurring or predictable revenue that a provider can underwrite
- Gross margins high enough to give up a share of revenue for a year or more
- A specific use with a fast, measurable payback, such as a proven marketing channel or a sales hire
- You want to keep your equity and your board
Not a fit
- No revenue yet: there is nothing to share or underwrite
- Thin or volatile margins, where every point of revenue is already spoken for
- Covering payroll or a cash gap with no plan to repay it
- You need more capital than your revenue can support, which is where equity fits
“You can't get this kind of debt unless you already have revenue. … These are all revenue-based debts. It's very hard to get loans; you got to get equity capital if you have no revenue.”
See What You Qualify For
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No equity. No board seats. No full personal guarantee.
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Frequently Asked Questions
Sources
Founderpath wrote this guide. Typical ranges are attributed to the publications that state them, at the point where we use them. The worked example is our own calculation from the inputs shown, and the code behind it is tested. Founderpath's terms come from our product page and published workbook. Sources were checked on October 15, 2026.
- Wikipedia: Revenue-based financing
- NerdWallet: Revenue-based financing (updated March 5, 2026)
- Shopify: Revenue-based financing (published June 23, 2025)
- California 10 CCR § 900: definition of sales-based financing
- New York Financial Services Law § 801: definition of sales-based financing
- Freiberger Haber LLP: New York's three-factor loan test
- Troutman Pepper Locke: In re Kossoff PLLC takeaways
- Founderpath: Revenue financing product page
- Founderpath: Receivables purchase calculator (workbook)
Related Financing Guides
Recurring Revenue Financing
On FounderpathAn ARR loan repaid in fixed monthly installments. Priced on your recurring revenue, not assets.
Read the guideNon-Dilutive Funding
On FounderpathCapital that does not require giving up equity, board seats, or ownership.
Read the guideMerchant Cash Advance
On FounderpathCapital repaid as a percentage of monthly revenue. Flexible for seasonal businesses.
Read the guideSubscription Financing
On FounderpathGrowth capital underwritten against predictable MRR and ARR, from subscription lines to term loans.
Read the guideNon-Dilutive Capital for SaaS Founders — Funded in 24 Hours
Founderpath has deployed $281M to 760 bootstrapped SaaS founders. Connect your data, get a fixed funding offer, keep all your equity.
- No equity — keep 100% of your company
- No board seats, no warrants, no covenants
- Funding offer in 24 hours after connecting data
- Fixed monthly payments — no revenue percentage
- No closing costs or origination fees
- Minimum $10K MRR — worldwide eligible