Revenue-Based Financing: How It Works, Costs & Choosing a Provider
Updated October 2026
Revenue-based financing (RBF) lets a business raise capital without giving up equity. You repay it as a share of your monthly revenue, so payments rise in strong months and fall in slow ones.[1]
This guide covers how RBF works, what it costs, how it compares with other options, and how to choose a revenue-based financing company.
Hum doesn’t offer revenue-based financing.
If a fixed-term loan could work for you, Hum Financial is a direct lender offering $1M–$50M term loans with set payments, built around your business rather than a credit box. See our guides to direct lending and business term loans.
What is revenue-based financing?
Revenue-based financing is funding a business receives in exchange for a percentage of its future revenue. It is also called revenue-based lending or royalty-based financing.[1][2]
The provider sets a total repayment amount up front. The business pays a fixed share of its revenue each period until that total is repaid, and then payments stop.[1]
Two things set RBF apart:
- No equity is sold. In most deals, investors don’t take an ownership stake or board seats.[1][2]
- No fixed monthly payment. Payments move with revenue instead of following a set schedule.[1]
How does revenue-based financing work?
Most RBF deals follow the same four steps.[1][2]
- You apply with your revenue data. Providers focus on revenue and margins more than collateral or personal credit. Pre-revenue companies generally can’t qualify.[1]
- You receive a lump sum. The provider sets a repayment cap, a multiple of the amount you receive.[1]
- You repay a share of revenue. Each month you pay an agreed percentage of revenue. If revenue drops, the payment drops too.[1][2]
- Payments end at the cap. Once you have repaid the full capped amount, the agreement is done.[1]
Example (illustration only)
A company receives $500,000 with a 1.4x repayment cap and agrees to repay 5% of monthly revenue.
| Item | Amount |
|---|---|
| Capital received | $500,000 |
| Repayment cap (1.4x) | $700,000 total repaid |
| Cost of capital | $200,000 |
| Payment in a $400,000-revenue month (5%) | $20,000 |
| Payment in a $300,000-revenue month (5%) | $15,000 |
At $400,000 a month, the company would finish repaying in 35 months. Faster growth means a faster payoff; slower months stretch it out. The figures are illustrative and are not an offer of terms.
How much does revenue-based financing cost?
The cost of RBF is the difference between what you receive and the repayment cap. There is usually no interest rate.[1][2]
| Term | What it means | Typical range |
|---|---|---|
| Repayment cap | Total repaid as a multiple of the capital received | 1.2x–3.0x[1]; CFI’s example uses 1.5x[2] |
| Revenue share | Share of monthly revenue paid each month | 1%–15%; some providers go up to 25%[1] |
| Term | How long repayment takes | Often no fixed end date; one provider offers 2–4 years[1] |
| Minimum revenue | Revenue needed to qualify | Varies by provider; examples include $500,000 and $3 million a year[1] |
On a $100,000 advance with a 1.2x cap, you repay $120,000, so the financing costs $20,000.[1]
Timing affects the real cost. The cap stays the same whether you repay in 18 months or 36, so paying it back faster makes the effective annual cost higher.
RBF can be expensive compared with traditional financing, but it typically relies less on collateral and usually requires no equity.[1][2]
Looking for $1M–$50M in growth capital?
Hum Financial, Hum Capital’s direct lending arm, provides non-dilutive financing to established U.S. businesses, with typical terms of 12–36 months.
See If You QualifyRevenue-based financing vs. other options
The main choices are a bank or SBA loan, venture debt, equity, or RBF. They differ most in repayment terms, dilution and who qualifies.
| Revenue-based financing | Bank or SBA 7(a) loan | Venture debt | Equity (VC or angel) | |
|---|---|---|---|---|
| Repayment | Share of monthly revenue until the cap is reached[1] | Usually fixed monthly principal and interest[3] | Typically 3–4 years, sometimes 6–12 months interest-only first[5] | No repayment |
| Cost | Fixed cap, often 1.2x–3.0x[1] | Interest rate | About 7%–12% interest plus fees[5] | Ownership stake |
| Dilution | None in most deals; some include warrants[1][2] | None | Small, through warrants in many deals[5] | Yes |
| Collateral | Less reliance on collateral than banks[1]; some providers still take a lien on business assets | Lender sets requirements[3] | Covenants tied to milestones are common[5] | None |
| Who qualifies | Businesses with steady revenue and healthy margins[1][2] | Varies by lender; SBA 7(a) loans go up to $5 million[3] | Usually venture-backed, often around Series A or B[5] | Investors’ judgment of growth potential |
Venture debt is typically sized at about 20%–35% of a company’s most recent equity round.[5] Since July 2026, eligible small businesses can combine SBA 7(a) and 504 loans up to $10 million.[4]
Revenue-based financing for SaaS companies
SaaS and other recurring-revenue businesses are among the best fits for RBF.[1][2] Three traits make them a good match:
- Predictable revenue. Subscription revenue makes it easier to forecast payments and payoff timing.
- High gross margins. RBF works best for companies with strong margins, since repayments come out of revenue.[2]
- Avoiding dilution between rounds. RBF can fund growth without selling equity or setting a new valuation.[1][2]
Companies with seasonal revenue or thin margins may find the payments harder to manage.[1]
For more financing options for software companies, see Bridging to Growth: 6 Non-Dilutive Financing Models for SaaS Companies.
How to choose a revenue-based financing company
Terms vary widely between providers, so compare offers on the same basis before you sign. These are the questions to ask:
- What is the repayment cap? This sets your total cost. Compare caps side by side.[1]
- What percentage of revenue will you pay? A higher share means faster repayment and less cash each month.[1]
- How is revenue measured? Check whether payments are based on gross revenue, and how refunds and one-time sales are treated.
- What are the fees? Ask whether there are origination, closing or early-repayment fees on top of the cap.
- What are the eligibility rules? Minimum revenue requirements range from about $500,000 to $3 million a year among the providers NerdWallet reviewed.[1]
- Are there warrants or covenants? Some deals include warrants or performance requirements. Read the agreement closely.[2]
- How fast can they fund, and how much? Make sure the amount fits your plan and the timing fits your need.
It’s also worth comparing any revenue-based offer with a direct loan, which has a set term and payment schedule.
Is revenue-based financing right for your business?
- You have steady, recurring revenue and healthy gross margins
- You want growth capital without giving up equity or board seats
- You don’t have the collateral or credit history a bank loan requires
It may not fit when:[1]
- You are pre-revenue
- Your revenue is highly seasonal or unpredictable
- Your margins are tight or your fixed costs are high
For established businesses that want a set term and predictable payments, direct lending is another non-dilutive option. Hum Financial, Hum Capital’s direct lending arm, provides $1M–$50M in non-dilutive growth capital to established U.S. businesses, with typical terms of 12–36 months.[6]
Related reading:
- Revenue-Based Financing vs. Cash Flow Lending: Which One Fits Your Business?
- The Founder’s Guide to Non-Dilutive Capital in 2026
- What Is Venture Debt? A Founder-Friendly Guide
Ready to explore direct lending? Get funded by Hum.
Frequently asked questions
How does revenue-based financing work?
You receive a lump sum and repay it as a fixed percentage of monthly revenue until you reach an agreed total, called the repayment cap.[1]
Is revenue-based financing a loan?
It depends on how the agreement is written, and providers structure it in different ways. What sets RBF apart from a typical term loan is that payments vary with revenue and the cost is set by a repayment cap rather than an interest rate.[1][2] Review the agreement with your advisor to understand how yours is structured.
What is a typical repayment cap?
Caps commonly range from about 1.2x to 3.0x the amount received.[1]
What percentage of revenue do you repay?
Usually 1%–15% of monthly revenue, and some providers go up to 25%.[1]
Do you give up equity with revenue-based financing?
Not in most deals. Providers generally don’t take an ownership stake or board seats, though some agreements include warrants.[1][2]
Can a pre-revenue startup get revenue-based financing?
Generally no. Providers base the deal on existing revenue, and many set minimums such as $500,000 or more in annual revenue.[1]
What happens if revenue drops?
Your payment drops with it, because it is a percentage of revenue. Repayment then takes longer.[1][2]
This article is for general information only and is not financial, legal or tax advice. Terms vary by provider and by business. Talk with a qualified advisor before entering any financing agreement.
Sources
- Randa Kriss and Olivia Chen, “What Is Revenue-Based Financing?”, NerdWallet, updated March 5, 2026.
- “Revenue-Based Financing”, Corporate Finance Institute, accessed October 26, 2026.
- “7(a) loans”, U.S. Small Business Administration, updated July 27, 2026.
- “SBA Doubles Cumulative 7(a) and 504 Loan Limit to $10 Million”, U.S. Small Business Administration, May 18, 2026.
- Julianne Pepitone, “Venture Debt”, Shopify, June 20, 2025 (citing Carta and Silicon Valley Bank).
- Hum Financial, Hum Capital, accessed October 26, 2026.
