# Revenue-Based Financing: How It Works, Factor Rates and How Remittance Follows Sales

Revenue-based financing is a [merchant cash advance](/loans-and-financing/merchant-cash-advance/) remitted as a specified percentage of sales: a purchase of future receivables, not a loan. The provider pays a funded amount and collects until the payback amount is reached, priced with a factor rate rather than an interest rate: $10K–$500K, depending on the funding provider. Same-day decisions from some, subject to provider approval and document turnaround.

[See your financing options](https://capitalgurus.com/apply/) · [(725) 425-4307](tel:+17254254307)

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- Same-day decisions from some providers. Subject to provider approval and document turnaround.
- 700+ industries served

Rates, factor rates, fees and terms are set by the funding provider that makes your offer and are disclosed in that provider's agreement. Figures on this page are illustrative ranges from providers in our network, not offers. Revenue-based financing is not a loan and is priced with a factor rate rather than an interest rate; any annualized figure is for comparison only.

## In this section

- [Compare merchant cash advance](https://capitalgurus.com/loans-and-financing/merchant-cash-advance/)

## At a glance

- **Typical amount**: $10K–$500K, depending on the funding provider
- **Estimated payback period**: 3 to 18 months, moving with revenue, depending on the funding provider
- **Speed**: same-day decisions from some providers, subject to provider approval and document turnaround
- **Minimum time in business**: 12 months, considered by some providers
- **Minimum monthly revenue**: $15,000, considered by some providers
- **Credit considered from**: 525, considered by some providers
- **Collateral**: None pledged; the provider purchases future receivables
- **Cost expressed as**: Factor rate, not an interest rate
- **Structure**: Purchase of future receivables
- **Remittance**: A specified percentage of sales, collected daily, weekly or monthly

Some providers consider applications at these minimums. Meeting a minimum does not guarantee an offer.

## How revenue-based financing works

**Definition** Revenue-based financing is the purchase of a fixed amount of a business's future revenue, collected as a specified percentage of sales until the payback amount is reached. It belongs to the [merchant cash advance](https://capitalgurus.com/loans-and-financing/merchant-cash-advance/) family: same factor rate, same payback amount. Only the remittance differs.

### What does the percentage do?

The share of each dollar of sales that the provider collects.

The percentage stays fixed; the dollars it produces move with sales. The total is the payback amount set at signing.

### Which revenue does it apply to?

Card sales, deposits or gross revenue, depending on the funding provider.

A share of card settlements, the holdback, leaves cash and checks untouched; a share of total deposits does not.

### Why is it not a loan?

Three facts, all written into the agreement you sign with the provider.

- **A purchase agreement**, not a promissory note.
- **A factor rate**, rather than an interest rate.
- **No maturity date.**

[Work out a payback amount](https://capitalgurus.com/calculators/business-loan-calculator/): Funded amount × factor rate = payback amount. An advance is not a loan and carries no interest; any annualized figure is for comparison only.

## How much you can get, and over how long

The range and payback period above are the outer edges of the network, depending on the funding provider, rather than a range you choose from; the period moves with revenue.

The amount and the percentage offered follow:

- Deposit consistency
- Your seasonal pattern
- Existing positions
- Your credit profile

### A higher or a lower percentage?

- **A higher percentage**: Larger remittances, collected sooner.
- **A lower percentage**: Smaller remittances over a longer period.

The payback amount is the same either way.

### Two habits that help

- Ask which revenue base the percentage applies to.
- Test the percentage against your slowest month.

Decisions from some providers the same day, depending on the provider.

Subject to provider approval and document turnaround.

[Get my options](https://capitalgurus.com/apply/) · [(725) 425-4307](tel:+17254254307)

## What revenue-based financing costs

The factor rate is set by the provider and disclosed in your agreement. Several states also require a standardised disclosure with the offer, among them [California](https://dfpi.ca.gov/press_release/dfpis-commercial-financing-disclosure-regulations-approved-to-become-effective-as-of-december-9-2022/) and [New York](https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202302011); the [state list](https://capitalgurus.com/locations/#states) links each law.

- **A factor rate**: The payback amount less the funded amount is its cost. (Set once, at signing)
- **The specified percentage**: It changes the calendar, not the cost. (Compare the payback amount first)

On top of the factor rate, depending on the funding provider:

- Origination fee
- ACH fee

Where charged, stated in the agreement.

**$100,000 funded with a $130,000 payback amount** collects that same total, however fast sales deliver it. Illustrative example, not an offer.

[See what an offer states](https://capitalgurus.com/loans-and-financing/merchant-cash-advance/revenue-based/#apply)

### Remittance example: one offer, three months

| Month | Sales | Remitted at 10% |
|---|---|---|
| Strong | $90,000 | $9,000 |
| Average | $60,000 | $6,000 |
| Slow | $30,000 | $3,000 |

The $130,000 payback amount does not change in any month; only the time taken to collect it does. Illustrative example, not an offer. Any annualized figure is for comparison only; an advance is not a loan and carries no interest.

## Who qualifies for revenue-based financing

- **12 mo** time in business
- **$15K** monthly revenue
- **525** credit score

Plus three months of bank statements and a government ID. A personal guarantee is commonly required.

Some providers consider applications at these minimums. Meeting a minimum does not guarantee an offer.

### If you do not fit

The product changes rather than the answer.

- Under 12 months? [startup business funding](https://capitalgurus.com/loans-and-financing/startup-funding/)
- Credit under 525? [business financing with bad credit](https://capitalgurus.com/solutions/bad-credit/)

Providers decide mainly on bank statements.

### What strengthens a file

Readable revenue, in roughly this order.

- **A clear pattern.** A steady seasonal shape is readable.
- **Few negative days.** And few overdrafts in the months shown.
- **Few existing positions.** Stacked files are reduced or declined.
- **A clear revenue base.** Card-heavy sales are simplest to structure.

## How to apply for revenue-based financing

We check your options with a soft credit pull only, so looking does not change your score.

### What you'll send

- Three months of bank statements — four in CA, NY, FL and GA with some providers
- A government ID

Send them complete

- Complete months, all pages

[See your financing options](https://capitalgurus.com/apply/)

### Worth asking before you sign

Which revenue base applies? How often does reconciliation run?

[Talk to a funding advisor](https://capitalgurus.com/contacts/).

1. **Apply once** (About 5 minutes): One application reaches the providers in our network that fit.
2. **Send your statements**: Bank statements and an ID for most files: complete months, every page.
3. **Review the file** (Same-day decisions from some providers): A funding specialist confirms the amount and the revenue base. Subject to provider approval and document turnaround.
4. **Compare the offers and sign**: You sign with the provider you choose. Each offer states: Funded amount, Factor rate, Payback amount, Specified percentage, Revenue base, Reconciliation. Depending on the funding provider.

## When a share of sales fits, and when it does not

A short, revenue-generating need in a business with uneven sales.

| Ask yourself | Good use | Not for |
| --- | --- | --- |
| Are your sales uneven? | **A seasonal business.** | **Level revenue.** |
| Do you need a fixed end date? | **No: flexibility matters more.** | **Yes.** A fixed remittance is easier to budget. Use instead: [merchant cash advance](https://capitalgurus.com/loans-and-financing/merchant-cash-advance/) |

### Better fit elsewhere

- A recurring gap: Use instead [Business line of credit](https://capitalgurus.com/loans-and-financing/line-of-credit/), drawn only when you need it
- Not sure which product fits: Use instead [Working capital financing](https://capitalgurus.com/loans-and-financing/working-capital/), the short-term options side by side

An advance has no maturity date.

- [What Is Revenue-Based Financing](https://capitalgurus.com/blog/what-is-revenue-based-financing/)
- [Funding Options for Seasonal Businesses](https://capitalgurus.com/blog/seasonal-business-funding-options/)

## What the percentage is taken from

The base matters as much as the number.

### Card settlements

The holdback

Cash and checks are untouched.

### Total deposits

Every deposit

Everything landing in your account.

### Gross revenue

Each period

A period's revenue, shown on statements.

Ask which base applies before you sign.

### Share of sales vs. a fixed remittance

| Compare | Share of sales | [Fixed daily or weekly ACH](https://capitalgurus.com/loans-and-financing/merchant-cash-advance/) |
| --- | --- | --- |
| What is collected | A specified percentage of sales | The same amount each time |
| Strong month | More | Same amount |
| Slow month | Less | Same amount |
| Payback period | Moves with revenue | Close to the estimate |
| Reconciliation clause | Normally standard | Sometimes, on request |

Set by the funding provider and disclosed in its agreement.

[The Pros and Cons of Merchant Cash Advances](https://capitalgurus.com/blog/merchant-cash-advance-pros-and-cons/)

## Related financing

- [business line of credit](https://capitalgurus.com/loans-and-financing/line-of-credit/): Standby capital you draw only when you need it, then draw again.
- [working capital financing](https://capitalgurus.com/loans-and-financing/working-capital/): Cash for payroll, stock and the gaps between deposits and bills.

## Keep reading

### Guides

- [types of business loans](https://capitalgurus.com/guides/types-of-business-loans/)

### From the blog

- [What Is Revenue-Based Financing](https://capitalgurus.com/blog/what-is-revenue-based-financing/)
- [Funding Options for Seasonal Businesses](https://capitalgurus.com/blog/seasonal-business-funding-options/)
- [How Merchant Cash Advances Affect Business Taxes](https://capitalgurus.com/blog/how-merchant-cash-advances-affect-taxes/)

[Merchant Cash Advance](https://capitalgurus.com/blog/category/merchant-cash-advance/)

## Revenue-based financing questions

### What is revenue-based financing?

It is an advance remitted as a specified percentage of your revenue until an agreed payback amount is reached. It is not a loan; the cost is a factor rate rather than an interest rate. Because remittance rises and falls with sales, it suits seasonal and card-heavy businesses. The funded amount, payback amount and percentage are all stated in the agreement.

### How is revenue-based financing different from a merchant cash advance?

It is the same product family with a different remittance. Both are purchases of future receivables priced with a factor rate. A standard advance is usually collected as a fixed daily or weekly ACH; a revenue-based agreement takes a specified percentage of sales instead, so the amount collected changes as sales change and the payback period moves with it.

### What is the specified percentage?

The share of your sales the provider is entitled to collect, written into the purchase agreement. It is applied to card settlements, total deposits or gross revenue, depending on the funding provider, and it does not change when sales move; the dollar amount it produces does. Ask which revenue base the percentage applies to before you sign.

### How long does the payback take?

Providers estimate 3 to 18 months, depending on the funding provider, but with a revenue-based structure that is an estimate and not a schedule. Strong sales shorten it; a slow season stretches it. The payback amount itself is fixed when you sign, so a longer period does not cost more: the same total is collected over more time.

### What happens if my sales fall?

Less is collected, which is the point of the structure. Revenue-based agreements normally include a reconciliation clause that trues the remittance up to actual revenue over an agreed window. Contact the provider before a remittance is missed and ask how reconciliation is triggered, how often it runs and what documentation it needs. This is general information, not legal advice.

### Why is revenue-based financing not a loan?

Because the transaction is a sale. You sign a receivables purchase agreement rather than a promissory note, and there is no fixed maturity date. The provider's return is the factor rate applied to the funded amount, fixed at signing, rather than an interest rate. Where an annualized figure is shown it is for comparison only.

### Can a seasonal business qualify?

Often, yes, and the structure is built for it. Providers decide mainly on bank deposits, so a clear seasonal pattern across the statements is readable rather than disqualifying. Some providers consider credit from 525 with 12 months in business and $15,000 in monthly revenue. Meeting a minimum does not guarantee an offer.

Still have a question? [talk to a funding advisor](https://capitalgurus.com/contacts/)

## Let remittance follow your sales: see which revenue-based financing offers fit your business.

[Apply now](https://capitalgurus.com/apply/) · Call [(725) 765-4512](tel:+17257654512)

About 5 minutes, soft credit pull only. [talk to a funding advisor](https://capitalgurus.com/contacts/)

By the Capital Gurus Editorial Team · Reviewed by Joseph Wartz · [Editorial policy](https://capitalgurus.com/editorial-policy/)

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Source: https://capitalgurus.com/loans-and-financing/merchant-cash-advance/revenue-based/ · Last reviewed 2026-10-28 · Capital Gurus is not a lender.