How Does Revenue Based Financing Work

It is a hybrid of borrowing money and selling stock yet it is not wholly either.

How does revenue based financing work. Revenue based funding is provided by firms that see potential in a business like a private equity firm might but who don t want ownership. Revenue based financing also known as royalty based financing is a type of capital raising method in which investors agree to provide capital to a company in exchange for a certain percentage of the company s ongoing total gross revenues. Instead it is a way to sell some of your future revenues in order to receive an upfront cash advance. Instead the firm is willing to offer the business a loan which is repaid by taking a portion of the business s revenue.