Revenue-Based Financing (RBF)

TL;DR

A non-dilutive financing structure where a lender advances capital and is repaid as a fixed percentage of monthly revenue until a multiple is reached.

Revenue-based financing advances capital against a percentage of future revenue. The borrower repays a fixed percentage of monthly revenue (typically 1–10%) until the lender receives a pre-agreed multiple of the principal (typically 1.3–2.0×). No equity, no fixed schedule — payments scale with revenue.

RBF is most useful for companies with predictable recurring revenue (SaaS, e-commerce subscriptions, consumer apps) that want to fund growth without dilution. The total cost can be higher than venture debt but the absence of fixed payments reduces solvency risk.

Worked example

An e-commerce brand doing $400k MRR borrows $1M from a revenue-based-finance lender. Repayment: 6% of monthly revenue until $1.4M is repaid (1.4× cap). At current run-rate, payoff in ~18 months — no equity given up, no fixed monthly payment if revenue dips.

Common pitfalls

• Using RBF in seasonal businesses without a payment cap that respects the seasonality.
• Ignoring the effective interest rate when revenue grows fast.
• Stacking RBF on top of equity terms that conflict.

When this shows up in a pitch deck

Rarely a deck topic; relevant in capital-strategy conversations with the board and CFO.

Related terms

• Venture Debt — Debt financing extended to venture-backed startups, often used to extend runway between equity rounds with minimal additional dilution.
• Bridge Round — A short-term funding round between priced rounds, often a SAFE or note from existing investors, used to extend runway to the next milestone.
• Runway — The number of months the current cash balance will last at the current net burn rate before the company runs out of money.
• Burn Rate — The rate at which a company spends cash, typically reported monthly. Reported as either gross burn or net burn.
• Bootstrapping — Building a company without outside equity capital, financing growth from revenue, savings, or debt instead.

Use this in your next pitch deck

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