Revenue Based Finance
Revenue-Based Finance (RBF) is a funding method where businesses receive cash in exchange for a percentage of future revenue. It offers flexible repayments based on sales, ideal for e-commerce, SaaS, and seasonal businesses. Funding ranges from £10,000 to millions, with costs typically between 10-30% of the advance.
Updated: 23rd September 2025
Revenue-Based Finance (RBF) is a form of cash flow finance whereby a company receives funds in exchange for a percentage of its future monthly revenue until a predetermined repayment cap is met.
In a legal context, businesses are selling a percentage of their future revenue rather than taking on a traditional loan. This means credit scores play less of a role, while sales performance is the critical factor.
The most unique aspect of RBF is that it doesn’t require fixed monthly payments. In a similar vein to Merchant Cash Advances and invoice financing, the lender takes a percentage of the future sales until the principal and “royalty” are repaid.
Revenue-based finance is a UK funding model where a lender advances cash and is repaid by taking an agreed % of future revenues.
How does Revenue-Based Financing work in the UK?
There are four stages to the revenue-based financing process.
Eligibility
Complete an online form and connect your sales platform and/or accounting software. This data pipeline allows for an automated assessment of your revenue patterns.
Offer
Based on the revenue data and basic company details, you will be presented with an offer. The advance amount is often up to a third of annual recurring revenue, or 4-7 times your monthly recurring revenue.
Your offer will likely have a repayment cap and this is the amount that must be repaid. For example, a 1.2x repayment cap for a £10,000 advance means paying back £12,000.
Revenue-share repayments
There are two structures for repayments. The most common repayment method is to pay an agreed percentage of your monthly sales (for example, 5%) directly to the lender, with payments continuing until the cap is repaid, regardless of the time it takes.
Completion
When the repayment cap is met, the agreement terminates. There are no further obligations, but you may still have a facility in place that allows you to request a re-advance.
- Eligibility check → Connect sales/accounting platforms
- Offer & cap (e.g., 1–2× advance)
- Revenue-share repayments → Repay according to sales inflows
- Completion → Stops at repayment cap
How much Revenue-Based Financing can you secure?
Funding amounts for UK revenue-based finance typically range from £10,000 to several million. You are limited by three main factors:
- Annual recurring revenue (ARR)
- Monthly recurring revenue (MRR)
- Revenue predictability
Most lenders will offer up to a third of your ARR or around 4-7 times your MRR. They may assess both and choose whichever is lowest.
So, a SaaS company generating £600,000 ARR may think they will get funding for £200,000. However, if the MRR is only £25,000, then they may only be offered between £100,000 and £175,000.
Revenue predictability is the third factor that can limit the amount advanced. If revenue received fluctuates significantly, or worse, has been consistently declining, then this may further reduce the advance offered.
Flat fee RBF is better for shrinking firms, but is more expensive for growing firms.
Jump to:
Revenue Finance vs Other Business Finance Options
| Feature | Revenue-Based Finance | Term Loan | Merchant Cash Advance | Invoice Finance | Equity / VC |
|---|---|---|---|---|---|
| Typical speed to funds | 1 – 2 days | 1 – 4 weeks | 1 – 2 days | 3 – 5 days | 4 – 6 months |
| Repayment style | % of revenue until cap | Fixed monthly | % of card sales daily | On invoice payment | None |
| Indicative cost | 6% – 12 % flat fee | 6.9% – 15 % APR | Factor 1.1–1.5 Implied APR can run to 30% – 90% | Service fee 0.5–3 % + discount rate 1–5 % until invoice is settled | Founder equity |
| Dilution |  | | | |  |
| Security / PG | None | Often | None | Debtor assignment | N/A |
| Pros | Fast financing with no personal guarantees. Repayments align with performance, and no equity is given away. | Predictable repayments, longest terms, lower headline rate. | Credit-light approval, funding in 24h – 48h, repayments flex with revenue. | Scales with sales ledger; no extra debt on the balance sheet; strong for long payment terms. | No repayments, strategic partners, large ticket sizes. |
| Cons | It can be expensive and it doesn’t suit start-ups. Cash flow pressure can also be deceiving. | Inflexible. Payments are due even when sales dip. Personal guarantees are usually required. | High overall cost; only suits card-heavy firms; daily sweeps can choke cash flow in quiet periods. | Only B2B; disclosure can affect customer relationships; fees mount if debtors pay late. | Loss of control, long process, investor rights/board seats. |
| Best suited for | SaaS, e-commerce, predictable revenues | Broad use if cash-flow-stable | Card-heavy retail, hospitality | B2B with long payment terms | High-growth tech |
You can compare business finance options in more detail here.
The Types of Revenue-Based Finance
UK RBF falls into two main structures. So far, this guide has focused mainly on variable collection.
Variable collection
Variable collection is the traditional RBF model, where lenders collect a fixed percentage of your revenue each month (often between 2% and 10%).
This adapts nicely to performance, and a poor month will lead to a smaller amount collected. This is reassuring, because with variable collection, everybody understands that the full amount will be repaid eventually, as well as the advanced fee (or “royalty”).
Example:
- Advanced £100,000
- 1.23x cap means that £123,000 will be repaid, no matter what
- Increased sales mean that you will repay sooner than expected
Flat fee
A flat fee structure differs because it has no agreed or fixed repayment total; the total cost of the advance is unknown. Instead, the monthly repayments (which, like all RBF arrangements, are a fixed percentage of sales) are paid continuously for an agreed term length (e.g., three years).
So while you also pay according to performance, you don’t repay a fixed amount. Instead, if performance has been poor, you may end up repaying less than expected once the term length comes to an end.
Example:
- Advanced £100,000
- Pay a percentage of monthly revenue (e.g., 5%)
- You make monthly repayments until the end of the agreed term, with no cap.
| Advantages | Drawbacks |
|---|---|
| Non-dilutive | Effective cost can exceed loan APRs |
| No personal guarantees | Lending typically limited to £10K – £5M |
| Payments flex with sales | Not ideal for low-margin or volatile revenue models |
| Fast decisions (24-48 h) | Revenue data sharing is required |
| No hard maturity date | Doesn’t suit long repayment periods |
| Fast-growing companies settle quickly | Cash flow pressure with fluctuating payments |
Who can benefit from Revenue-Based Finance?
Ecommerce businesses
RBF is ideal for purchasing stock, particularly for retailers with a healthy gross profit margin. The advance becomes a tool to leverage growth, and the ROI is quite easy to forecast as being positive because it’s being spent on revenue-generating stock.
Companies with seasonal performance
For firms that struggle with seasonality, such as a tennis restringing shop, the repayment structure may put them at ease. Knowing that you can reduce your repayments during slow months helps take the pressure off your cash flow.
SaaS and subscription businesses
Subscription services have a recurring revenue that is perfect for RBF. In fact, lenders will reward revenue consistency, which is often strong through subscriptions, and perceive you as less risky. For the borrower, they can easily forecast these repayments with their expected monthly revenue.
Card-taking hospitality & leisure businesses
Hospitality and leisure businesses tend to have a high proportion of card payments and therefore benefit from highly transparent, high-volume sales. This volume makes for better consistency compared to, for example, a clockmaker or construction firm, and it also makes it easier to link the software during the application.
Typical Costs & Repayment Calculation
The fee is often between 10% to 30% of the advance amount, but it can be higher than this for high-risk industries or those with volatile sales. A fee of 20% is often represented as “1.2x”, similar to the MCA factor rate.
Revenue share is typically between 2% and 10% of monthly revenue. Again, a riskier profile as a borrower will likely lead to higher revenue share agreements.
Illustrative repayment scenario
| Month | Monthly Revenue | Collection (6%) | Remaining Balance |
|---|---|---|---|
| 1 | £180,000 | £10,800 | £119,200 |
| 2 | £180,000 | £10,800 | £108,400 |
| 3 | £180,000 | £10,800 | £97,600 |
| 4 | £180,000 | £10,800 | £86,800 |
| 5 | £180,000 | £10,800 | £76,000 |
| 6 | £180,000 | £10,800 | £65,200 |
| 7 | £180,000 | £10,800 | £54,400 |
| 8 | £180,000 | £10,800 | £43,600 |
| 9 | £180,000 | £10,800 | £32,800 |
| 10 | £180,000 | £10,800 | £22,000 |
| 11 | £180,000 | £10,800 | £11,200 |
| 12 | £180,000 | £10,800 | £400 |
| 13 | £180,000 | £400 | £0 |
Total repayment: £130,000 over 12 months
Revenue share: 6% of revenue collected
Effective cost: £30,000 (30% of advance)
Approximate APR: 30%
While APR is not a part of the RBF arrangement, we can backtest RBFs to gauge what their relative APR was in hindsight. Here, it was around 30%.
How to apply online
The RBF application process is highly automated, meaning an offer may come back to you within 24 hours.
- Step 1: Complete the short online form, which checks your eligibility. Here, basic information is provided, such as address, trading history, and revenue estimates.
- Step 2: Secure the API link to your sales data. This might be your ledger within the accounting software or it might be the platform you facilitate payments through.
- Step 3: Receive a personalised offer within 24 hours.
- Step 4: Choose which offer has the best terms and e-sign it.
- Step 5: Wait 24-48 hours for funds to arrive in your business bank.
Case Studies
SaaS platform scales marketing spend by 60 %
A Manchester-based software company that provides SEO tools generates a reliable £100,000 per month in subscription sales. In order to scale, they decide to ramp up marketing by 60%.
Because of the reliable monthly subscriptions, RBF lenders are willing to go on the upper end of lending limits, offering 7x their monthly recurring revenue. With a £700,000 advance and the knowledge that their cost-per-customer-acquisition is £700, they can reliably bring in 1,000 new paying customers by spending their advance on advertising. If all goes to plan, revenue will increase by 50%, and so too will their access to future revenue-based financing.
Online fashion retailer doubles inventory pre-peak
A Brighton-based fast-fashion brand used £100,000 RBF to double its inventory levels ahead of Spring-Summer, which are the peak months. With certainty over their Spring sales, their main goal is to increase capacity so they don’t sell out of in-demand items.
The £100,000 advance with a 1.3x cap means that the financing costs £30,000. However, being a fast-fashion brand, material costs are low and gross margins of 70% mean that, while it’s an expensive way to scale, it’s still been a profitable one. The result was a growth in local market share, greater bulk discounts, and an overall strengthening of their capacity come next Spring.
Coffee chain adds two locations with no equity loss
After being denied a bank loan, a coffee chain in Chester has secured £120,000 RBF as a way to facilitate opening two new locations. At a 1.4x cap, this is an expensive way to open two new shops. However, the other option was to release equity and dilute, and this goes against the brand image, which is built on him. So, while costs were high in the short-term, the risk of missing repayments is low, and 100% ownership is retained.
FAQs
Is revenue-based finance regulated in the UK?
RBF falls outside of normal consumer credit regulations. FCA oversight exists, but is limited. For example, a credit check is usually required with most loan products, but this isn’t the case with RBF (even though some providers may run one anyway).
Is it halal / Sharia-compliant?
While RBF isn’t a typical loan product, it may still conflict with Islamic finance principles due to gharar. However, Sharia-compliant providers do exist as profit-sharing partnerships.
How quickly can I be approved?
1 working day is the benchmark for receiving funding decisions.
Do repayments hurt my credit score?
RBF repayments generally do not appear on personal credit files because they’re structured as a commercial transaction rather than personal debt. Missed repayments may be reported, though, and this can certainly affect future borrowing potential.
Is RBF a loan or equity?
Legally, it is neither of these – it is structured as a sale of future receivables. This gives it a unique but grey-area classification, but accounting teams usually agree on treating it as a liability (debt).