Understanding Revenue-Based Funding - Fresh Funding | Fast, Flexible Funding for Small Businesses.

Understanding Revenue-Based Funding

Revenue-based funding (RBF) is a flexible alternative to traditional financing where a business receives a lump-sum advance in exchange for remitting a percentage of future revenue. Payments adjust with sales — lower during slow periods and higher when revenue increases. There are no fixed instalments or interest charges, and collateral is typically not required.

How it works

A business receives an upfront advance and agrees on a factor rate (commonly 1.2× to 1.5×).
The business remits a percentage of monthly revenue; payments vary based on performance.
Repayment continues until the total amount due (advance × factor rate) is fully remitted.

Benefits

• Flexible during slow periods
• Fast approval with minimal documentation
• No equity dilution
• Transparent total cost

RBF differs from merchant cash advances (MCAs), which often pull payments directly from card sales. RBF also differs from loans because it has no interest rate and no amortising repayment schedule.

When to use RBF

RBF suits businesses with consistent or growing revenue, including SaaS, e-commerce, and service-based companies. It is less suitable for very early-stage or extremely low-margin businesses.

Revenue-based funding provides capital quickly while aligning repayment with performance.