Revenue-based financing
Cash repaid as a percentage of revenue up to a multiple: non-dilutive, priced by the multiple.
In revenue-based financing a provider advances cash and is repaid a fixed percentage of the company's ongoing revenue until it has received a set multiple of the advance, often called the cap. Nothing is sold, so nothing dilutes; the cost is the multiple, and how fast it is paid depends on how fast revenue arrives.
Revenue-based financing
- Good at
- No dilution and no valuation
- Payments fall when revenue falls
- Fast to arrange
- Watch for
- The multiple is expensive if revenue grows fast and repays it quickly
- Payments come out of revenue every period, from the start
- Needs revenue: no help before there is any
- Best for
- Companies with steady, predictable revenue — subscription revenue especially
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Background reading explains; it is never the authority for a rule. Anything marked as a convention is ours, not the rule-maker's.
- Background reading — not an authority
- Wikipedia, “Revenue-based financing” (opens in a new tab)Revenue-based financing — backgroundFree to read
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.