Revenue-Based Financing: How Payments Work and What It Really Costs
“Revenue-based” can describe two different things: how a provider decides to fund you, and how you pay the money back. Most businesses looking for it want the first. Much of the market sells the second — under a name that doesn’t tell you which one you’re getting.
Revenue-based financing is funding advanced against your business’s sales, repaid either as a percentage of what you sell or as a fixed daily or weekly amount. It’s usually priced as a total to repay rather than an interest rate, and depending on how that payment is calculated, the same offer can take five months or ten. Which version you’re being offered is the one question the product name doesn’t answer.
“Revenue-based” can mean two different things
One describes how you get approved. The other describes how you pay it back. They travel under the same name, and only one of them is what most businesses are actually looking for.
Decided on your revenue
The provider looks at your sales and your bank deposits rather than at collateral or a credit score alone. Steady money coming in is the thing being underwritten. This is what most owners mean when they search for revenue-based financing — and on its own it does not require your payment to be a percentage of anything. A Working Capital Loan is decided this way.
Repaid out of your revenue
The payment itself is calculated from your sales — a set percentage of what you take in, or a fixed debit meant to track them. That is a repayment structure, not an approval standard, and it carries a different set of risks. It is the half of the phrase that most pages skip.
How the payments actually work
Three structures are in common use. They are marketed with similar language and they behave very differently. Each bar below is one payment.
A percentage of what you sell
Your remittance is a set share of your sales — often taken by your card processor as a split of each day’s batch, or by ACH against your bank deposits. Sell less this week and you send less. Sell more and you send more. The total you owe doesn’t move; only the pace does.
A fixed amount, with a reconciliation clause
The payment is a flat daily or weekly debit, but the agreement includes a mechanism — reconciliation — for bringing it back toward a true share of your actual sales. How much protection that gives you depends entirely on how the clause is written, which is why it’s the second question in the framework below.
A fixed amount
The same debit clears whether the week was strong or slow. This is common, and it’s the structure that sits furthest from what “revenue-based” sounds like. That doesn’t automatically make it a worse deal — a fixed payment with a known end date is far easier to plan around than a moving one — but you should know that’s what you’re signing.
Worth knowing: under Texas law the first two are both “sales-based financing” — a fixed payment counts if the agreement provides for a reconciliation process. Virginia’s definition covers only the first. The label the provider uses doesn’t enter into it.
What it costs — and why “rate” is the wrong word for it
Revenue-linked financing is normally quoted as a multiplier and a total, not as a rate over time. That’s a different kind of number, and it hides the thing that actually determines what the money costs you.
If the payment is fixed
A fixed structure divides that $51,200 into equal payments. At $320 per business day it takes 160 of them — about 32 weeks. You know the finish date on the day you sign, and nothing your sales do will change it.
If the payment is a percentage of sales
At 12% of what you take in, the same $51,200 reaches the provider whenever your sales get it there. With a fixed-term loan you choose the term and the term sets the cost. Here you don’t choose it — your sales do, and you find out which as you go.
| Monthly sales volume | 12% remittance | Time to repay | Total repaid |
|---|---|---|---|
| $85,000 — strong | $10,200 / mo | about 5.0 months | $51,200 |
| $60,000 — as underwritten | $7,200 / mo | about 7.1 months | $51,200 |
| $42,000 — slow | $5,040 / mo | about 10.2 months | $51,200 |
Swipe to see the full table →
The total never moves
In every row it’s $51,200, and the cost of the financing is $11,200. A strong quarter doesn’t earn you a discount — it gets you to the same number sooner.
Faster isn’t cheaper. It’s the opposite.
Paying that same $11,200 in five months instead of ten is roughly twice the cost per month of financing — for a business that did better. It’s the least intuitive thing about this structure and the most useful thing to understand before you sign.
What the example doesn’t tell you
Two things. Fees outside the factor — origination, underwriting, ACH charges — are real money and none of them appears in the multiplier, so ask for the complete list rather than the headline. And a multiplier isn’t an annual rate, so it can’t be set against one directly; in a growing number of states you’re entitled to a written disclosure that does that arithmetic for you, which is covered below.
For how costs compare across the different kinds of business financing, see business loan rates and costs, or run your own numbers in the business loan calculator.
Payoff calculator for a fixed-payment advance
For an existing revenue-based advance or merchant cash advance with a set payment. Enter the figures from your agreement to see the total, what is left, and how long it runs. Nothing is sent anywhere.
Enter your figures and press Calculate.
Assumes the payment never changes and no fees beyond the factor. If your agreement has a reconciliation clause or a percentage-of-sales remittance, the finish date moves with your sales and this schedule is only the starting estimate. For a true APR from a factor rate, use the factor rate calculator. Illustrative only; not a quote or an offer.
Illustrative only. These figures show how the arithmetic works. They are not a Fundur offer, not a quote and not a rate range — Fundur is a marketplace and does not set pricing. Actual amounts, factor rates and terms are determined by the provider during underwriting and disclosed to you before you accept anything.
What to check in the offer itself
The name on the website won’t tell you how the financing works. These five questions will — and you can answer every one of them from the document already in front of you.
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1
Is the payment a percentage of your sales, or a fixed amount?
Where to look: the payment or remittance section, usually near the top.
A percentageYour payment moves with your sales. Slow weeks cost less, strong weeks cost more, and the total you owe stays where it started.
A fixed amountThe same debit clears whether sales were strong or weak. That’s a very different cash-flow risk — and it’s common, despite the name on the offer.
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2
If it’s fixed, is there a reconciliation clause — and does it say shall or may?
Where to look: search the document for “reconcile” or “reconciliation.”
“Shall,” on request or on a scheduleYou have a real mechanism for lowering the payment when sales fall. Find out what you have to send in, and how long the provider has to act on it.
“May,” at the provider’s discretion — or no clause at allThe flexibility the product is marketed on may not be something you can insist on. Raise it before signing rather than after.
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3
Is there an end date, or only a total to be collected?
Where to look: the term, maturity, or “estimated term” section.
A fixed end dateYou know when this finishes and can plan the rest of the year around it.
Only a total, collected until it’s paidThe length is an outcome of your sales, not a term you agreed to. Strong months finish it sooner — but the dollar cost doesn’t shrink, so the cost per month of financing goes up.
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4
What does the agreement call the money, and what happens if the business fails?
Where to look: the opening recitals, and the default or remedies section.
“Loan,” “principal,” “interest,” “borrower”It is presented as debt, and the usual expectations about debt apply.
“Purchase,” “purchased amount,” “receipts,” “seller”It is presented as a sale of your future receivables rather than a loan. Whether a court would agree depends on the whole agreement — courts in New York, for instance, weigh whether reconciliation is genuine, whether the term is finite, and what recourse the provider keeps if the business fails.
Either way, look for a personal guarantee, and for a confession of judgment — a clause letting a provider obtain a judgment without a hearing. New York restricted those against out-of-state businesses in 2019, but the clause still turns up.
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5
How is the price expressed — and is there a written disclosure?
Where to look: the cost or fee schedule, and any separate disclosure page.
A factor rate and a totalSomething like 1.28 × $40,000 = $51,200. That’s a dollar cost, not a rate over time. It tells you what you pay, not how expensive it is per year.
A separate written disclosureIn a growing number of states you’re entitled to one, and in California and New York it has to include an annual percentage rate. That’s the number worth asking for by name.
These questions help you understand what you’re being offered. They aren’t legal advice, and checking them doesn’t settle how a transaction would be classified — that depends on the whole agreement. If it matters to your situation, a business attorney is the right person to ask.
If you’d rather compare a few structures side by side than work through one offer alone, Fundur can show you what you qualify for.
Is revenue-based financing the same as a merchant cash advance?
Sometimes yes, sometimes no — and the name isn’t what decides it. In the US small-business market, “revenue-based financing” is frequently the label one provider uses for what another calls a merchant cash advance. Elsewhere it means something quite different. What separates them isn’t the term on the website; it’s how the agreement calculates your payment, what it calls the money, and what it says happens if sales fall.
Why the two terms get used interchangeably
Several providers ranking on the first page of Google for “revenue-based financing” state plainly that a merchant cash advance is a form of it, or that they use revenue-based financing to structure one. State law, meanwhile, doesn’t use either phrase for the category: Texas and Virginia both legislate “sales-based financing,” defined by mechanics rather than marketing. Under that definition, products sold under both names routinely land in the same bucket.
Why some products called RBF really are different
There’s a second market using the same phrase — growth capital for software and ecommerce companies, underwritten on recurring revenue, repaid over a year or more against a fixed repayment cap, and sold as an alternative to giving up equity. It’s sometimes called royalty-based financing. If that’s what you’re researching, most of this page won’t apply to you: different providers, different underwriting, different time horizon.
| Term | When it’s the right word |
|---|---|
| Sales-based financing | The regulatory category. The right term when you’re talking about what a state disclosure law does and doesn’t cover. |
| Merchant cash advance | An agreement structured as a purchase of future receivables, usually tied to card sales and priced on a factor rate. |
| Revenue-based financing | The broad marketing umbrella. It means materially different things in the small-business market and the startup market — which is exactly why the agreement is worth reading. |
So the useful question was never which label the provider picked. It’s the five above: how the payment is calculated, whether reconciliation is real, whether the term is finite, what the agreement calls the money, and how the price is disclosed. A fuller treatment of merchant cash advances specifically — how they’re priced, what those agreements typically contain, and what to do if you already have one — is a separate subject from this page.
The written disclosure you may be entitled to
This is probably the most useful thing on this page for anyone weighing two offers, and almost nobody mentions it.
What the disclosure has to show
- The amount you’ll actually receive
- The finance charge
- The total you’ll repay
- The estimated term
- The payment amounts
- Every other fee and charge
- The prepayment terms
- What the broker is being paid
Where an APR is required
California and New York go further and require an annual percentage rate. California’s rule calls it an “Estimated Annual Percentage Rate,” because when payments depend on sales the term can only be estimated.
Texas, Virginia and Louisiana require the dollar figures but not an APR.
If you’re in California or New York, that estimated APR is the single most comparable number you’ll be handed. It’s calculated to a defined standard rather than estimated by a website, and it’s worth asking for by name.
If you’re somewhere else, ask anyway. A provider who won’t put the total repayment and the estimated term in writing has told you something useful.
A growing group of states now require some form of this disclosure — among them California, Connecticut, Florida, Georgia, Kansas, Louisiana, Missouri, New York, Texas, Utah and Virginia, with Vermont’s licensing and disclosure rules arriving in July 2027.
State disclosure requirements last verified 20 August 2026. Sources: Cal. Code Regs. tit. 10 § 914; N.Y. 23 NYCRR 600; Tex. Fin. Code ch. 398; Va. Code ch. 22.1; Vt. Act 142 (2026). General information, not legal advice — consult a licensed attorney in your state about your own situation.
How this compares to the financing Fundur works with
Five mechanics, side by side, rather than a list of pros and cons. The row that matters most is the last one.
| Working Capital Loan | Business Line of Credit | Invoice Factoring | Percentage-of-sales financing | Merchant cash advance | |
|---|---|---|---|---|---|
| How the payment is calculated | A fixed instalment on a set schedule | Interest on what you’ve actually drawn | You’re advanced against an invoice you’ve already issued | A set share of each day’s or week’s sales | Usually a share of card sales, or a fixed debit meant to track them |
| Is the total known when you sign? | Yes — set at the outset | Depends on what you draw, and when | Yes, per invoice | The amount is fixed; the timing isn’t | The amount is fixed; the timing isn’t |
| What sets the length | The term you agree, commonly 3 to 24 months | You do — by drawing and repaying | When your customer pays | Your sales volume | Your sales volume, or the fixed debit |
| How the price is quoted | A factor rate and a total repayment | Interest on the drawn balance | A fee per invoice | A factor rate and a total | A factor rate and a total |
| What happens when sales fall | The payment doesn’t change | You can simply draw less | Fewer invoices to factor | The payment falls and the term stretches | Depends entirely on whether there’s a reconciliation clause |
Swipe to see all six columns →
Fundur is a marketplace: it helps businesses compare financing options from providers in its network, and it doesn’t set pricing or make credit decisions. Those options are decided on business revenue rather than on collateral — which is the first half of “revenue-based,” and for most owners the half that actually mattered.
What any individual provider’s agreement says about the second half is a question for that agreement. The five questions above are how you ask it.
Where to read more: Working Capital Loan, Business Line of Credit, and Invoice Factoring.
What providers look at, and what they ask for
When repayment is tied to sales, the underwriting follows the sales. Providers tend to care less about how big your deposits are than about how steady they are — a business doing $50,000 a month every month is a more legible risk than one doing $90,000, then $15,000, then $70,000. How many deposits you make, how many days end with a negative balance, and whether you already have other financing in place all carry more weight here than they would on a longer-term loan.
The paperwork usually starts in the same place: recent business bank statements, basic details about the business, and a clear picture of any financing you already have. For how qualification works across all six of Fundur’s financing options, see what lenders actually look at — and if collateral is the part you’re weighing up, unsecured business loans covers that separately.
If you’re earlier in the process than that, the step-by-step guide to how to get a business loan walks through what happens from first enquiry to funding.
Typical signals only — exact thresholds vary by lender and borrower.
These are the typical minimums to see what you qualify for. Requirements vary by product — SBA loans and term loans generally require more time in business and a stronger credit profile.
Who this fits — and who it doesn’t
It can fit when…
- Your card or deposit volume is steady and reasonably predictable
- The need is short and specific, and you can name what repays it
- Speed genuinely matters more than cost right now
- Bank or SBA financing isn’t available inside your timeframe
Think harder when…
- Your business is strongly seasonal. A fixed daily payment running through a dead quarter is the classic way this goes wrong.
- You’re funding something long-lived. Short-term money against a five-year asset strains cash flow however good the number looks.
- You already have advances outstanding. That changes what’s realistically available, and it’s worth raising early rather than late.
- You can wait. If the purchase holds for a few weeks, longer-term financing will almost always cost less.
If none of that quite describes you, it’s worth stepping back before deciding. The answer for a slow-paying invoice is usually invoice factoring; for a machine or vehicle it’s equipment financing; for a planned, one-time investment it’s usually a business term loan. The full set of financing options lays out how the six compare.
Common questions
Is revenue-based financing a loan?+
Is revenue-based financing the same as a merchant cash advance?+
How is the payment calculated?+
What happens if my revenue drops?+
If sales go up, do I save money?+
Do I need good credit?+
How much does revenue-based financing cost?+
What is a factor rate?+
What documents will a provider ask for?+
Can I pay it off early, and would it save anything?+
Does Fundur offer revenue-based financing?+
See what your business qualifies for
Fundur will show you what’s available across its provider network, so you can compare structures — not just headline prices — before you commit to anything.
Fundur is a financing marketplace, not a lender. Fundur does not make credit decisions or guarantee approval, rates, terms, or funding times. Checking your options is a soft inquiry that won’t affect your credit score.