Revenue-Based Financing: Growth Capital in Days, Paid Monthly
Revenue-based financing is a term loan sized against a company trailing revenue rather than against its collateral, repaid in fixed monthly installments over 6 to 48 months. As of 2026 it runs $250K to $10MM, is typically sized at 10%-15% of annual revenue, prices at 1.25%-4% per month (roughly 18%-48% effective APR), and funds in 2 to 10 business days. The distinction that decides whether this product helps or hurts is the repayment mechanic. A merchant cash advance pulls 10%-20% of revenue by daily or weekly ACH until a fixed factor amount is paid, which commonly annualizes at 50%-200%+ and takes cash on days your customers have not paid you yet. Revenue-based financing takes one payment a month, and the better products forgive unearned interest on early payoff, which can cut the real cost close to half. Same speed as an advance, roughly a third to a half of the cost. The practical qualifying gate is three consecutive months of healthy bank deposits.
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Where this fits best
Our sweet spot is $5MM to $50MM in revenue on asks between $250K and $5MM. We work meaningfully smaller and meaningfully larger — we have closed $250K factoring lines and $50MM facilities in the same year. What usually decides fit is your credit, your existing debt, and whether the structure works at all. Size is the last thing we look at, not the first.
- •Sweet spot is $5MM-$50MM in annual revenue and two or more years operating — neither is a cutoff
- •Profitable enough to carry a fixed monthly payment without the payment deciding your month
- •Capital needed in days, and needed for growth rather than to fill a hole
- •No existing advances, or at most one you intend to clear out with this
- •Three consecutive months of healthy, consistent deposits. A soft December tells a story underwriters do not like
- •Owner credit matters more here than in asset-based lending. A clean 680+ meaningfully widens the options
What is actually going on
The company this page is written for is doing fine. Revenue is up, the pipeline is real, and there is a specific thing that needs funding in the next two weeks: inventory ahead of a season, a crew for a contract that was just awarded, materials for an order that came in bigger than expected. The bank is not the problem in the sense of having said no. The bank is the problem in the sense of taking three to twelve weeks, and the opportunity does not wait three to twelve weeks. So the owner starts making calls, and within about a day the market finds them. Somebody offers $500K in 48 hours at a 1.35 factor rate. The paperwork is short, the funding is real, and almost nothing in the document is expressed as an interest rate, so the cost is genuinely difficult to evaluate under time pressure. What is being sold is speed, and speed is exactly what the buyer came for. What gets lost is the mechanic. A 1.35 factor on $500K is $675K of payback, extracted at 10%-20% of daily revenue, starting the next business day, whether or not your customers have paid you. On a nine-month payback that annualizes past 70%. And because the amount owed is fixed rather than accruing, paying it off early usually saves nothing, so a strong quarter accelerates the extraction without reducing the bill. Revenue-based financing, structured as a fixed monthly payment, funds in the same two to ten business days on the same kind of underwriting. It reads trailing bank deposits rather than collateral, so it does not require a receivable book or free-and-clear equipment. It costs 1.25%-4% per month rather than a factor rate. And on the better products, paying it off early forgives the unearned interest, which is the single largest lever on what the money actually ends up costing. The reason to know this before you need it is that the decision gets made in about 48 hours, and 48 hours is not enough time to learn a new product category. One clarification, because the term is used for two different things. Some products called revenue-based financing take a percentage of revenue each month, so the payment rises in a strong month and the amortization schedule moves under you. Serve places the fixed-payment structure: a known monthly amount over a known term. The variable-payment version has real problems in a seasonal business, and we have written about them separately.
How it works
Underwriting reads deposits, not collateral
Twelve months of bank statements, with the last three carrying the most weight. The question is whether the business consistently generates enough cash to carry a fixed monthly payment. No field exam, no appraisal, no borrowing base, which is why this closes in days rather than weeks.
Size lands at 10%-15% of annual revenue
A $12MM company should expect roughly $1.2MM to $1.8MM as the realistic ceiling. Knowing that number before you start saves the conversation where someone asks for $4MM against $12MM of revenue and hears no from six lenders.
Terms get set at 6 to 48 months, monthly
Pricing runs 1.25%-4% per month depending on deposit consistency, time in business, industry, and owner credit. Ask specifically about prepayment: real forgiveness of unearned interest is the difference between a 30% effective cost and a 16% one, and it is not standard across lenders.
Funding in 2 to 10 business days
Emergency payroll situations have closed inside 24 to 72 hours. What stretches a five-day close is almost always a document sitting on the borrower side, not the lender.
Treat it as step one where something cheaper exists
If the business has receivables, inventory, or owned equipment, the right play is usually to close RBF now and put an asset-based line or factoring facility into underwriting the same week. Six to eight weeks later the cheaper facility retires the RBF. Speed and price are both available; they are just not available on the same day.
Terms, costs and timelines
| Facility size | $250K - $10MM+ |
|---|---|
| How it is sized | Roughly 10%-15% of annual revenue |
| Pricing (2026) | 1.25%-4% per month, roughly 18%-48% effective APR |
| Structure | Fixed monthly payment over 6-48 months. Revolving versions available from select lenders |
| Payment frequency | Monthly. No daily or weekly ACH extraction from sales |
| Time to close | 2-10 business days; 24-72 hours on emergency payroll |
| Early payoff | The better products forgive unearned interest, which can nearly halve the real cost. Confirm this in writing |
| What underwriting reads | 12 months of bank statements, weighted to the last 3. No appraisal, no field exam |
| Owner credit | Matters more than in asset-based lending. Clean 680+ widens the options meaningfully |
| Lien position | Subordinate structures available; will sit behind an existing factor or ABL |
| Serve fee | A success fee, earned only on closing. Agreed in writing before you sign anything. No retainers, no upfront costs |
Revenue-based financing vs. the advance you will be offered first
| A merchant cash advance | Revenue-based financing | |
|---|---|---|
| Speed | 24-72 hours | 2-10 business days, and 24-72 hours when payroll is the reason |
| How the price is quoted | A factor rate, which is not an interest rate and does not annualize on its own | A monthly rate you can convert to an APR on the term sheet |
| Typical effective APR | 50%-200%+, higher once positions stack | 18%-48% |
| Repayment | 10%-20% of revenue by daily or weekly ACH, starting immediately | One fixed payment a month |
| Paying it off early | Usually saves nothing. The payback is a fixed amount, so a strong quarter just extracts it faster | The better products forgive unearned interest, which is the largest single lever on real cost |
| Effect on the next facility | A UCC filing and a daily draw that makes an ABL harder to underwrite | Clean monthly payment history, which is what qualifies you for cheaper money in a year |
| Intermediary compensation | Built into the factor rate rather than quoted separately, so you rarely see it | A success fee, agreed in writing before you sign and earned only if you close |
How this plays out, with numbers
A specialty food manufacturer doing about $13MM in revenue lands shelf placement with a regional grocery chain. Filling it means roughly $900K of additional raw material and a second production shift, starting in three weeks. The company is profitable, has a $1.5MM bank line that is drawn to $1.3MM, and has never taken outside capital. The first offer to arrive is an advance: $1MM in 48 hours at a 1.32 factor rate, so $1.32MM of payback pulled at 12% of daily deposits. On the projected nine-month payback that is an effective cost north of 68%, extracted daily against receivables that pay in 45 days. It would fund the shelf placement and squeeze the cash the shelf placement depends on. What we place instead is $1.4MM of revenue-based financing at 2.1% per month over 30 months, funded in seven business days, with written forgiveness of unearned interest on early payoff. Monthly payment lands near $63K. In parallel, an asset-based facility goes into underwriting against the growing receivable book from the chain, and closes about nine weeks later at Prime plus 3%. The company retires the RBF at month eleven and, because the prepayment terms were real, pays roughly $214K of total interest rather than the roughly $390K the full 30-month schedule implied. Same speed as the advance, and a little over a quarter of the cost.
A representative structure, sized to a typical file. Details are generalized — we do not publish client specifics.
When this is the wrong answer
Half of being useful is being clear about what does not work. If one of these describes you, the honest path is below — and it may not run through us.
If you have $1MM+ of receivables from creditworthy business customers, an asset-based line or invoice financing at Prime plus 1%-5% is a fraction of the cost of revenue-based financing and the facility grows with sales instead of amortizing away. Do not buy RBF because it is faster if the cheaper facility can be in place in three weeks. We will usually structure both: RBF now, the cheap facility underwriting in parallel.
Adding a term loan on top of a stack is stacking, whatever it is called. The conversation you need is a consolidation that pays those positions off and closes them. That is a different page and a different lender set.
Revenue-based underwriting reads trailing deposits, so a declining trend prices badly or declines outright. If there is collateral, an asset-based facility looks at what you own rather than at the trend, and is the better door.
RBF is sized to 10%-15% of revenue, which almost never covers a purchase price. Acquisitions want SBA 7(a) for the price and a bridge for the timing gap.
Below that the revenue-based options thin out and most of what will look at you are advances. Still worth a conversation — sometimes there is an asset to lend against that changes the answer entirely, and if there genuinely is not, we will tell you rather than put you into something we would not want to sign ourselves.
