Revenue Based Funding

Revenue-Based Funding Is A Loan That A Business Agrees to Pay Back Over Time by Promising A Chunk of Its Future Revenue to The Financier Until A Fixed Dollar Amount Is Reached.

  • Fixed Repayment Target: Revenue-Based Financing Is A Loan with A Fixed Repayment Target Reached Over Several Years.
  • Fixed Repayment Amount: Generally, Revenue-Based Funding Comes with A Repayment Amount Of 1.5 To 2.5 Times the Principal Loan.
  • Flexible Repayment Periods: With Revenue-Based Funding, Repayment Periods Are Flexible; Pay Back the Agreed-Upon Amount Sooner If You Can or Later If You Must.
  • No Loss of Equity: With Revenue-Based Funding, Business Owners Don’t Sell Equity or Relinquish Control.
  • More Hands-Off Approach Than Private Equity: Revenue-Based Financing Firms Work More Closely with You Than Bank Lenders but Take A More Hands-Off Approach Than Private Equity Investors.

One of the most common forms of business financing is Revenue-Based Funding, a program in which money is provided to a company in exchange for a percentage of future revenues.

This is a great option for businesses who are already generating income, but don’t have the hard assets generally required for a traditional bank loan. Funding amounts can range from $10,000 to $2,000,000 based on your company’s monthly gross business revenue.

One of the most common forms of business financing is Revenue-Based Funding, a program in which money is provided to a company in exchange for a percentage of future revenues. This is a great option for businesses who are already generating income, but don’t have the hard assets generally required for a traditional bank loan. Funding amounts can range from $10,000 to $2,000,000 based on your company’s monthly gross business revenue.One of the most common forms of business financing is Revenue-Based Funding, a program in which money is provided to a company in exchange for a percentage of future revenues. This is a great option for businesses who are already generating income, but don’t have the hard assets generally required for a traditional bank loan. Funding amounts can range from $10,000 to $2,000,000 based on your company’s monthly gross business revenue.

Frequently Asked Questions

Get the Answers you Need to Common Questions About Revenue Based Funding. Everything you need to know about Revenue Based Funding and How your Business can Qualify.

What is revenue-based financing?
Revenue-based financing is a way for companies to secure growth capital similar to an equity investment but without any dilution or loss of control. A company agrees to pay a small portion of future monthly revenues to an investor instead of selling an ownership stake in return for cash. In fact, revenue-based financing is typically used to replace, or even complement, an equity investment because it offers the patience, flexibility, and agility of equity but does not require a valuation exercise, governance involvement, dilution, or a future liquidity event. High-tech enterprises and other businesses we work with see great benefits from revenue-based financing that supports their growth while allowing them to maintain control of the business and keep the value they create.
How does revenue-based financing work?
Revenue-based financing is typically structured with a multi-year repayment term in which the company pays a fixed percentage (usually 1% to 3%) of the revenues generated each month to their investor. To retire a revenue-based financing investment, a company typically makes these monthly payments until a pre-defined return multiple, internal rate of return, or date is reached, at which point the repayment obligation terminates. Unlike some other approaches to growth financing, revenue-based financing solutions typically don’t have any other fees, warrants, or hidden costs involved. Because payments are tied directly to revenues, the investment is very transparent; companies get a clear and accurate picture of their total cost of capital up front.
Why would a company want to consider revenue-based financing instead of traditional debt?
Traditional debt or loan structures can play an important role in supporting a company’s working capital needs, but they are often misaligned with the longer-term time horizons required to grow a business over many years. In addition to requiring personal guarantees, traditional debt generally involves fixed payment requirements and rigid financial covenants that are often incompatible with the contours of most growth-focused companies’ trajectories. In contrast, revenue-based financing solutions offer greater flexibility, more patience and a repayment framework tied to revenues. Moreover, you’re generally not required to maintain strict financial ratios, adhere to pre-set financial parameters, or pay facility fees on undrawn capital. As a business, you have significantly more agility.
How does revenue financing work?
Revenue-based financing is a way that firms can raise capital by pledging a percentage of future ongoing revenues in exchange for money invested. A portion of revenues will be paid to investors at a pre-established percentage until a certain multiple of the original investment has been repaid.
Is revenue-based financing debt or equity?
Revenue-based financing is often considered a hybrid of equity and debt financing, which makes it particularly popular with startups, technology companies, and SaaS (software as a service) businesses.
How much Revenue Based Financing can you secure?

Finance providers will look at your recurring revenue to determine how much they’re willing to lend you. Most set maximum loan amounts up to a third of the company’s annual recurring revenue (ARR) or four to seven times their monthly recurring revenue (MRR). At Uncapped, we loan between $10k – $5m. Repayment fees are usually between 6-12% of revenue, based on whether you plan to invest the funds in predictable revenue-generating activities like advertising or higher-risk activities like hiring.

Is Revenue Based Financing right for you?
Revenue based financing is the perfect funding option if you don’t want to dilute equity or spend time raising capital to invest in initiatives that are very likely to drive revenue. The ability to make repayments based on your monthly revenue means you can keep growing without worrying about whether you’ll meet the cost of a fixed loan. So whether or not you plan to use other funding sources, any business owner looking to retain equity and grow quickly can benefit from using revenue based financing as part of their funding strategy.
Where did the revenue-based funding model come from?
Revenue-based financing, sometimes known as royalty-based financing, was used by oil investors in the early 20th century to finance oil and natural gas exploration, and later by the pharmaceutical industry, Hollywood, and energy companies. Investors began applying it to early-stage companies in the 1980s. Revenue-based financing blends the best of bank debt and venture capital, and a company should expect the cost of capital to fall within that range.
Is revenue-based financing just a fancy way to say “factoring” or “receivables financing”?
No. Happy Financial Group provides revenue-based financing, which means we give you unrestricted capital for growth in return for a small percentage of monthly revenues. “Factors” or “receivables financiers” basically speed up the cash flow from sales that already happened (or are just about to happen). Factoring provides working capital; revenue-based financing is growth capital. It comes with fewer restrictions and impositions on your workflow, and is paid monthly compared to daily or weekly, as with factoring.
if it’s a revenue loan, then what’s the interest rate?

No. Happy Financial Group provides revenue-based financing, which means we give you unrestricted capital for growth in return for a small percentage of monthly revenues. “Factors” or “receivables financiers” basically speed up the cash flow from sales that already happened (or are just about to happen). Factoring provides working capital; revenue-based financing is growth capital. It comes with fewer restrictions and impositions on your workflow, and is paid monthly compared to daily or weekly, as with factoring.

What happens if my company gets acquired?

First, we congratulate you on your hard work paying off! Second, you as a borrower would have a repayment commitment to uphold, which in the case of an acquisition can be done by “buying us out” of the remaining debt.