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Revenue-Based Financing To Grow Your Small Business

Whatever the size of your company, we'll find funding programs designed to suit you!
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    Intro To Revenue-Based Financing

    One of the most significant flaws of traditional small business loans is the repayment terms. You must make a fixed monthly payment, even though every company has ups and downs. Many companies cannot qualify for traditional bank loan products for this exact reason. Consistent revenue isn’t possible when your industry comes with busy and slow seasons. If this sounds like your business, Revenue-Based Financing may be the right financing product for your needs.

    Revenue-based business loans are easy to qualify for and, depending on your sales volume, even more accessible to pay back. This unique product is similar to a merchant cash advance, but it’s not just for businesses with high debit and credit card sales volumes. You can also access higher borrowing amounts and longer terms.


    In this guide, we’ll answer the following questions and more:

    Love this place. Matt Wiemann was super helpful and hands on the entire process. Was super easy process and everyone was fast , pleasant, and professional. I would definitely recommend them to anyone. I have had 3 loans and this was the easiest one. If you want honest people who will personally walk you thru the entire process then these are the people you want to help your business grow with the proper financing.
    Robert Inigo

    Free Consultation No Obligation

    What Is Revenue-Based Financing?

    Revenue-based financing is sometimes called a “business cash advance” or “revenue-based business loan.” You receive a lump sum based on your monthly revenue. But instead of fixed monthly payments, you can make daily, weekly, or monthly payments depending on the type of lender. Like a merchant cash advance, your payments fluctuate with sales volume. But while payments for a merchant advance come from debit and credit card sales, the payments for a revenue-based loan come from your total sales.

    $5K – $5M
    Starting at 1-6% p/mo
    3 – 24 months
    1-2 Business days

    How Does Revenue-Based Financing Work?

    Your borrowing amount is based on total monthly receipts. This might allow a borrower to access more significant funding amounts than a merchant cash advance, where the advance amount is only based on debit and credit card sales.

    Depending on how your cash flows, the lender will determine what payment structure will fit best (daily, weekly, monthly). The lender will then deduct a percentage of your revenue based on your assigned repayment frequency. This percentage, which usually falls below 10%, is known as a “capture rate.” When you have a high revenue day/week/month, you pay more, and vice versa.

    Though payment amounts fluctuate with sales, you must pay back your total amount within a given time frame.

    Recent Reports About Revenue-Based Loans

    According to the 2023 Small Business Credit Survey, 22% of small businesses received funding from an online lender, up from 17% in 2020.

    The global alternative financing market was valued at $6.57 billion in 2021 and is expected to reach $10.61 billion between 2023 and 2030, at an average annual growth of 6.17%. Source: Straits Research Alternative Financing Market Report

    In a recent Pymnts study, 62% of Main Street Small and Medium-Sized Businesses (SMBs) with $150,000 in annual revenue had no access to funding that could cover potential cash flow shortfalls. In the same study, 50% of SMBs with annual revenue between $150k and $1 million also didn’t have access to funding to cover a potential cash flow gap.

    What Are The Advantages of Revenue-Based Business Loans?

    Revenue-based financing allows businesses to put their recurring revenue to good use. If your revenue has improved dramatically over the past three months, you will most likely be able to access a large amount of capital. Traditionally, essential factors like credit score or annual revenue will have little (if any) impact on your loan size. Accessing more significant amounts with poor credit or no collateral is challenging with other products.

    Perhaps the best advantage of this type of product is the repayment terms. You don’t have to worry about making fixed payments during an unexpectedly slow day, week, or month. Instead, you only pay a fixed percentage of your sales. This is particularly ideal for seasonal businesses. The total cost of the loan decreases when your payments are more spread out. You could use the funds during the slow season without paying off the brunt of the debt until the busy season when sales pick up.

    Unlike a merchant cash advance, revenue-based business loans are not exclusively available to businesses with high debit and credit card sales volumes. It doesn’t matter which payment method your customers prefer as long as you have high monthly revenue.

    Revenue-based financing tends to carry longer terms than merchant cash advances, too. This is because while the latter requires a daily payment in most cases, the former can be paid monthly, weekly, or daily.

    What Are The Disadvantages of Revenue-Based Business Loans?

    Businesses that cannot qualify for other options or need quick access to capital often pursue revenue-based financing agreements. These business owners likely have poor credit, making it nearly impossible to obtain term loans or lines of credit. In lenders’ eyes, poor credit increases the likelihood that you won’t be able to pay off the loan on time.

    Products like revenue-based financing and merchant cash advances have high rates and fees to offset this risk. Revenue-based small business loans are usually even more expensive than merchant cash advances because of the higher borrowing amounts and longer terms. Throughout your term, you’ll likely accumulate a significant amount of interest.

    Get access to funds quickly
    The RBF approval process is easy
    Don’t need perfect credit history
    Use it for anything
    May not need a personal guarantee
    Higher rates & fees than traditional bank loans
    Might require collateral
    It gets more expensive with lower credit

    Revenue-Based Financing Compared To Other Products

    Merchant Cash Advances$5k – $1mStarting at 1-6% p/mo1-2 business days
    SBA Loan$50k-$5.5mStarting at Prime + 2.75%8-12 weeks
    Business Term Loan$10k to $5mStarting at 1-4% p/mo1-3 business days
    Business Line of Credit$1k to $1mStarting at 1% p/mo1-3 business days
    Receivables/Invoice Financing$10k-$10mStarting at 1% p/mo1-2 weeks
    Equipment FinancingUp to $5m per pieceStarting at 3.5% (SBA)3-10+ business days
    Revenue Based Business Loans$5K – $1mStarting at 1-6% p/mo1-2 business days

    Who Qualifies For Revenue-Based Financing?

    Approved businesses generally met the following criteria:

    Annual Revenue

    Credit Score

    Time in Business
    4 months+

    How To Apply For Revenue-Based Financing:

    The application takes just a few minutes if you have the required information. Funds can appear in your bank account in 1-2 business days. Here’s how to get started:

    Step 1: Consider Your Needs

    Before you begin the application process, take some time to make sure this is the right product for your individual needs. Will you be able to use the capital for your desired purpose? Is the repayment structure conducive to your cash flow? Do you know exactly how much funding to request? Answering these questions ahead of time will make the rest of this process much smoother.

    Step 2: Gather Your Documents

    The application requires the following documents and information:

    • Driver’s license
    • Voided business check
    • Bank statements from the past three months

    Step 3: Fill Out Application

    You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to supply the information from the previous section along with your desired loan amount.

    Step 4: Speak to a Representative

    Once you apply, a representative will contact you to explain the repayment terms, interest rates, and terms you qualify for. This will ensure that there are no surprises or hidden fees during repayment.

    Step 5: Receive Approval

    If and when you’ve been approved, funds should appear in your bank account in 1-2 business days.

    Your Revenue Business Loan Gets Set Up – Now What?

    Your revenue-based loan isn’t just a way to get financing for your company. It’s also an excellent opportunity to start building (or improving) your credit.

    Regardless of the type of loan you get, make all your required payments on time and in full. If you get a line of credit or another form of revolving credit, keep your balance below the credit limit.

    Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred interest rates and terms when you next need business financing.

    What If I’m Declined For Revenue-Based Financing?

    If an application is declined, it’s possible the borrower applied at the wrong time regarding their cash flow. Remember, this product significantly emphasizes monthly revenue, not annual revenue or gross margins. Hence, it would be best to have strong sales for the past three months to earn approval. Sometimes, you may need to provide statements to confirm that your scheduled payback months also did well in the previous year.

    And though revenue-based financing caters to borrowers with poor credit, the reason for the credit issues is relevant. To clarify, while bad credit can be due to circumstances beyond your control, others have so much debt they cannot afford to take on any more. A lender may conclude that taking on more debt would do more harm than good for your company.

    At UCS, we can help you explore your options and point you toward the most sensible choices. We might recommend a different, more affordable business financing tool in this case. Possible examples include business credit cards or even personal loans. These alternatives are usually easier to qualify for than business loans.

    Ready to take the next step and apply for Revenue-Based Financing?

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    Revenue-Based Financing FAQs

    Are Revenue-Based Business Loans Better Than Equity Financing/Venture Capital?

    Revenue-based business loans are similar to equity financing and venture capital. Both options technically involve selling a portion of your revenue. The difference is that you must pay interest and fees with debt financing, but you maintain complete control of the company. On the other hand, with equity financing, you don’t have to pay interest or fees, but you have to sacrifice a percentage of ownership to venture capitalists.

    In general, debt financing is typically favored by businesses willing to pay interest and fees to maintain control of the company rather than giving up equity to a venture capital firm. You may also consider royalty-based financing if your company receives royalties (and other revenue streams).

    How Much Will My Payment Be For Revenue-Based Business Loans?

    Your payment will be a percentage of your total daily, weekly, or monthly receipts. This percentage is determined through several factors, like credit score, cash flow, and your ability to provide collateral. Similar criteria are used to determine your repayment frequency.

    Let’s say your business lender allows you to have a repayment cap rate of 10%. If you made $20,000 in revenue for one month, your payment would be $2,000. But maybe sales slow down the following month, and you only generate $10,000. In this case, you would only have to pay $1,000.

    How Can I Use The Funds From Revenue-Based Business Loans?

    Technically, you can use the funds in any way you like. Your intended purpose of the working capital will likely have zero impact on your application. However, specific initiatives will more effectively capitalize on the advantages of the repayment and fee structure. Earlier, we noted that the loan’s total cost decreases when your payments are more spread out. Thus, you could use the funds during a slow period to prepare for a busy period in the coming months. You’d make a smaller payment when business is slow and a more substantial payment when sales pick back up.

    The more time between your slow and busy seasons, the less you’d pay for the loan. You’d pay more if you tried paying it off as soon as possible.

    Why Haven’t I Heard of Revenue-Based Business Loans?

    Compared to other business financing products, revenue-based business loans are relatively new. It’s one of the few products that doesn’t prioritize credit scores, and the repayment structure is unique. More and more business lenders have realized that credit score is not always the most accurate indicator of someone’s ability to repay. Many business owners also have poor credit due to circumstances beyond their control. Unfortunately, much of the business financing industry is still figuring that out.

    In summary, you probably haven’t heard of this product because only some lenders are shaping their offerings to suit borrowers with poor credit.

    How Long Will It Take To Pay Off My Revenue-Based Loan?

    The time it takes to pay off your loan depends on how fast your revenue grows. The more significant the revenue, the bigger the payment, and the quicker your loan gets paid. However, smaller revenue months mean lower payments and a longer loan repayment time.

    If you hope to pay your loan off faster, boost your revenue!

    Why Should I Consider Revenue-Based Financing Over a Traditional Business Loan?

    Getting a traditional bank loan can take days or even weeks and require one or more in-person meetings. They can require additional business documentation, paperwork, and a business plan. Conventional business loans usually focus on a business’s credit history and score.

    You should consider a revenue-based business loan if you’re looking for fast access to money for your quickly growing business. Maybe you have had credit challenges or no formal business plan. Yet now you need money for your company. If you can provide bank statements to verify your consistently growing revenues, a revenue-based business loan could be just what you need.

    Can I Get a Revenue-Based Business Loan with Bad Credit?

    Yes, this product is available to borrowers with bad credit. Accessibility is based almost entirely on monthly revenue. As long as you have strong monthly revenue, poor credit probably won’t prevent you from being approved. Revenue-based business loans tend to have high rates for this exact reason. If you have good or excellent credit, you can access lower interest rates, longer terms, and more convenient repayment terms by applying for another product, like a term loan.

    Low credit scores do not significantly harm your chances of getting approved for a revenue-based business loan. At United Capital Source, we’re more concerned about how much revenue your company makes and how much your financing will help you keep building that revenue.

    Applying for new business funding felt overwhelming, most of the lenders we considered didn't meet our business model and had rigid lending criteria that was a "one size fits all" concept. Thank goodness for United Capital Source and Danielle Rivelli, who is AMAZING!!!! Within seconds of entering our company details, she gave us a call, answered all of our questions, and we felt in good hands. We got the funding we needed, and it all happened within a matter of a day or two. Highly recommend.
    Jennifer Tirado

    Free Consultation No Obligation

    Why Choose United Capital Source?

    Why businesses choose UCS:

    Quick funding options that won’t affect credit
    Access to 75+ lenders with multiple products to choose from
    Financing up to $5 million in as few as 3 days
    1500+ 5 star reviews from happy clients!

    Ready to grow your business? See how much you qualify for:

      Current monthly sales deposit average to your business bank account?

      How much Working Capital would you like for your business?

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        Current monthly sales deposit average to your business bank account?

        How much Working Capital would you like for your business?

        At UCS, we understand the value of your time and want to ensure that your application has a great chance of approval. Please take note of the following details before applying:
        • To be eligible, it’s necessary to have a business bank account with a well-established U.S. bank such as Chase, Wells Fargo, Bank of America, Citibank, or other major banks. Unfortunately, online-based bank accounts like PayPal, Chime, CashApp, etc., are not permitted.
        • When describing your current average monthly sales deposits to your business bank account, please provide accurate information. Our approval process is based on your current business performance, and it’s essential to provide accurate details about your current sales in the first question on the application form. We cannot approve applications based on projected revenues after receiving funding.
        We appreciate your understanding and cooperation in ensuring a smooth and successful application process.
        1500+ 5 star reviews
        1500+ 5 star reviews

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