What is Revenue Based Finance?

Revenue based finance is a loan used specifically to procure inventory or supplies to manufacture inventory. This is an alternative to traditional bank loans as a creative way to finance business inventory. Merchant cash advances are an example of revenue based financing. Merchant cash advances are paid daily from a percentage of the credit/debit card transactions a business receives from selling their products.

How Revenue-Based Financing Works

When a borrower applies for a revenue based financing loan, they agree to pay back a percentage of their revenue, plus interest until the debt is related. This means the business makes payments every month in varying amounts instead of a fixed payment. For example, if you make $1000 in revenue, and your RBF payment is 10% of the monthly revenue, you pay $100 back toward the loan.