revenuebased

Revenuebased, or revenue-based financing (RBF), is a funding arrangement in which an investor provides capital to a business in exchange for a percentage of future revenue until a pre-agreed repayment amount is reached. It is an alternative to equity financing and traditional debt, designed to align investor returns with the company's performance. The model is commonly used by growth-stage firms, particularly in software-as-a-service and e-commerce.

Under RBF, payments vary with revenue. There is typically no fixed interest rate or amortization schedule; instead, a revenue share percentage is applied to monthly gross revenue, with a cap on total repayments that corresponds to a multiple of the funded amount. When revenue falls, payments fall; when revenue rises, payments rise. The agreement ends automatically once the cap is reached.

Revenue-based financing is attractive to companies with recurring revenue streams and uneven cash flow, seeking capital without giving up equity or pledging collateral. It often requires revenue visibility and ongoing reporting. Terms vary by provider and jurisdiction.

Advantages include no equity dilution, faster access to capital, and alignment of incentives. Risks include potentially high cumulative cost if revenue grows quickly or fluctuates, and reduced cash flow available for operations while the agreement is active.

RBF is offered by fintech lenders and specialized funds and is sometimes described as royalty- or revenue-based financing. It differs from traditional loans in structure and from equity in ownership, reflecting growing demand for non-dilutive growth capital.