Revenue Based Financing Definition

Revenue based financing or royalty based financing rbf is a type of financial capital provided to small or growing businesses in which investors inject capital into a business in return for a fixed percentage of ongoing gross revenues with payment increases and decreases based on business revenues typically measured as either daily revenue or monthly revenue.

Revenue based financing definition. It is first and foremost a debt instrument that is paid back by sharing in a company s revenue. Revenue based financing also known as royalty based financing is a method of raising capital for a business from investors who receive a percentage of the enterprise s ongoing gross revenues in. The payments might start off small when revenues are small and get bigger as the company grows and is better able to handle high payments. It is a hybrid of borrowing money and selling stock yet it is not wholly either.

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. Some student loans are moving toward this model as well. Instead of having fixed payments revenue based financing allows the business to make monthly payments in proportion to their revenue for that month. Instead it is a way to sell some of your future revenues in order to receive an upfront cash advance.

Learn about rbf and other types of non dilutive funding and connect with lenders using our free service. Revenue based financing is the best of both worlds where founders get large funding amounts while retaining ownership. Revenue based financing is helpful for growing businesses in cases where it isn t clear what a manageable debt load would be. Revenue based financing rbf is a way for small and startup companies to raise money for growth.

Revenue based financing is an alternative growth investment structure with different mechanics provisions and return profiles than either equity capital or traditional lending products. At flow capital we can fund up to 5 million through revenue based financing if the company qualifies based on its annual revenue or annual recurring revenue level.