Revenue-Based Financing (RBF)
Revenue-based financing is a form of capital where investors provide funding in exchange for a fixed percentage of the company's ongoing gross revenue until a predetermined total amount has been repaid — typically 1.3x to 2.5x the original investment.
Revenue-based financing sits between traditional debt and equity. Unlike a bank loan, there are no fixed monthly payments — repayment scales with revenue, so payments decrease during slow months and increase during strong ones. Unlike equity, founders don't give up ownership or board seats.
RBF is particularly well-suited for companies with predictable recurring revenue (SaaS, subscription businesses, e-commerce with repeat customers) that need growth capital but don't want dilution. Typical use cases include funding customer acquisition spend, inventory purchases, hiring, and market expansion.
Key terms to understand: the repayment cap (total amount repaid, usually expressed as a multiple of the investment), the revenue share percentage (typically 2-8% of monthly revenue), and the repayment period (usually 12-36 months depending on revenue trajectory). Providers include Clearco, Pipe, Capchase, and numerous specialty lenders focused on specific verticals.
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