How revenue-based financing works
A funder provides a lump sum in exchange for a set total collected from your future revenue. Collection happens through remittances, usually daily or weekly, either as a percentage of sales or a fixed amount. It is sometimes called a merchant cash advance. Roifunder helps businesses compare it with other options through our funding partners.
- Total repayment: fixed when you sign, often stated as amount funded × factor rate
- Remittance: a percentage of sales that flexes with volume, or a fixed daily or weekly debit
- Term: not always fixed; with percentage remittance, it depends on how fast sales come in
- What many funders review: deposit history and revenue consistency, alongside time in business and credit
The cost formula: total repaid minus cash received
The dollar cost is the total you repay minus the cash that actually lands in your account after fees. Divide that cost by the cash received for cost per dollar, then by the expected months to repay for cost per dollar per month. Those numbers let you compare revenue-based financing with a loan or line on equal footing.
Example: $40,000 funded at a factor of 1.35 means $54,000 repaid. A $1,000 fee is deducted, so $39,000 is deposited. Total cost is $54,000 − $39,000 = $15,000, or about 38 cents per dollar received. If it repays over six months, that is roughly 6.4 cents per dollar per month; over nine months, about 4.3 cents. The factor and fee are illustrative only, not a quote or a typical rate.
For a factor-by-factor walk-through, see what a 1.3 factor rate costs.
| Example month | Card sales | Fixed remittance (monthly) | 10% of sales |
|---|---|---|---|
| Strong month | $110,000 | about $8,715 | $11,000 |
| Average month | $90,000 | about $8,715 | $9,000 |
| Slow month | $60,000 | about $8,715 | $6,000 |
Fixed remittance versus a percentage of sales
A fixed daily or weekly remittance is predictable but does not flex when sales slow. A percentage of sales rises and falls with volume, so payments ease in slow months, but repayment takes longer and the total owed stays the same. Choose the structure that protects cash in your weakest months, then check the total cost.
The table shows the illustrative $54,000 repayment collected two ways. With a fixed remittance of about $415 per business day, roughly $8,715 comes out every month regardless of sales. With a 10 percent share of card sales, the amount follows volume: more in a strong month, less in a slow one. For more on matching the schedule to deposits, see daily vs. weekly vs. monthly payments.
Convert to a monthly figure and test it against profit
Daily and weekly debits look small, so convert them before deciding. Multiply a business-day remittance by about 21, or a weekly one by about 4.33, for a monthly equivalent. Then compare it with the cash left each month after cost of goods, payroll, rent and other payments. Compare against profit, never against revenue alone.
Example: a retailer with $90,000 in monthly sales and $12,000 left after all costs takes on a fixed remittance of about $8,715 a month. That payment uses about 73 percent of the monthly surplus, leaving little room for a slow week. The same retailer choosing a 10 percent share of sales would pay about $9,000 in an average month but about $6,000 in a $60,000 month. The conversion method is in our daily-to-monthly guide, and the downside test is in the revenue-drop stress test.
Does repaying faster make it cheaper?
Usually not with fixed-total pricing. The total is set when you sign, so repaying faster spreads the same dollar cost over fewer months, which raises the cost per month instead of lowering the total. Some contracts offer an early repayment discount, but that is contract-specific. Read your contract and ask the funder for the exact figure in writing.
This is also why an estimated APR on a short-term offer can look high: Example: the same $15,000 cost repaid over six months weighs about twice as much per month as it would over twelve. When an offer is disclosed as an APR, use it alongside the dollar total rather than instead of it.
When revenue-based financing makes sense, and when it does not
It can make sense when the money funds something that returns cash quickly, like stock for a proven busy season, and when card or deposit volume is steady enough to carry remittances. It is a poor fit for long-payback investments, thin margins or a business already covering another payment. If a current payment is too heavy, some owners look to lower your payment by stretching the term.
Stretching the term usually raises total cost, so run the numbers before choosing it. For long-lived investments, compare term loans or equipment financing. Requirements vary by product and funder; many look at time in business, monthly revenue and credit. Some approvals come within a day or two, depending on documents. Apply once to compare.
What you’ll typically need
- Recent business bank statements
- Card processing statements, if you accept cards
- Basic business and owner information
- Details of any current funding payments
Frequently asked questions
What is the total repayment amount on revenue-based financing?
It is usually the amount funded multiplied by the factor rate, set when you sign. In an illustrative case, $40,000 at a factor of 1.35 means $54,000 repaid. Subtract any fees from the funded amount to find the cash you actually receive, then subtract that from the total repaid to get your real dollar cost.
Are payments fixed or a percentage of sales?
Either, depending on the offer. A percentage-of-sales remittance flexes with your volume, while a fixed daily or weekly debit stays the same regardless of sales. The percentage version protects slow months but can take longer to repay. Read your agreement to see which applies and whether it can be adjusted if sales change.
How do I convert daily payments to a monthly cost?
Multiply a business-day payment by about 21, since most months have 20 to 23 business days. For a weekly payment, multiply by about 4.33. Then compare that monthly figure with the cash left after all your costs, not with revenue. Your contract states which days debits actually run.
Does repaying faster make it cheaper?
With fixed-total pricing, generally no: the total owed does not shrink when you repay faster, so faster repayment just concentrates the same cost into fewer months. Some contracts include an early repayment discount. If yours might, ask the funder for the exact discounted amount at a specific date, in writing.
Know your real cost first
Compare revenue-based financing with other options from our funding partners.
Updated September 14, 2026 · Roifunder Funding Team