Revenue based finance: funding repaid as a share of your sales

Revenue based finance gives your company a lump sum now in return for a share of future revenue until a fixed total has been repaid. Most lenders follow a similar process, driven by your sales data rather than a long application.

1. Data connection: you give read-only access to your bank accounts and, often, your payment processor, ecommerce platform, marketplace or subscription billing system.
2. Analysis: the lender reviews revenue trends, seasonality, margins, refunds, marketing spend and existing debt repayments.
3. Offer: the lender proposes an advance, a fixed fee and the percentage of revenue it will collect, sometimes with a minimum payment or expected term.
4. Agreement: you sign the contract, and directors are often asked for a personal guarantee.
5. Funding: the advance is paid to your company, or in some cases directly to a supplier or advertising platform.
6. Collection: the agreed share is collected automatically, usually daily, weekly or monthly, until the advance plus fee is repaid.

The lender keeps monitoring your connected data during the agreement. If revenue falls, repayments usually fall with it, although agreements with a minimum payment will still require that minimum.

Lenders look at different signals depending on how your company earns its revenue. Knowing what they focus on helps you prepare and explains why two similar-sized companies can receive very different offers.

Ecommerce brands

For online retailers, lenders usually look at sales by channel, marketplace payouts, return rates, stock levels and how much is spent on advertising to win each sale. Strong repeat purchase rates and steady margins after shipping and returns tend to help. Heavy reliance on a single marketplace account can count against you, because a suspension could stop revenue quickly.

SaaS and subscription companies

For subscription businesses, lenders often focus on monthly or annual recurring revenue, customer churn, renewal rates and how long customers stay. Annual contracts paid upfront, a broad customer base and low churn usually support a larger advance. Rapid growth helps, but lenders also want to see how long your cash will last at current spending levels.

In both cases, clean, up-to-date management accounts that match your connected data make the review faster and reduce follow-up questions.

Most revenue based finance is priced as a fixed fee on top of the advance, so you know the total repayable from the start. What that means in annual terms depends on how fast you repay.

• Fixed fee: a set amount, or a multiple of the advance, agreed upfront. It does not usually grow if repayment takes longer.
• Arrangement fee: some lenders charge a set-up fee, sometimes deducted from the advance.
• Minimum payment top-ups: if revenue drops below a set level, some agreements require a top-up to the minimum.
• Early settlement: because the fee is fixed, repaying early often saves little or nothing, although some lenders offer a discount.
• Default charges: fees may apply if data access is cut off or collections fail.

Lenders price on revenue size and stability, gross margin, growth, customer concentration, refund levels and existing debt. Compare offers on the total amount repayable, then ask how long repayment is likely to take, because a short repayment period at the same fee means a higher effective annual cost.

Illustrative example only: actual costs depend on the lender and your circumstances.

Imagine an online homeware brand receives £100,000 with a fixed fee of 15%, so the total repayable is £115,000. The lender collects 10% of monthly revenue.

• At £100,000 revenue a month, repayments are £10,000, so the balance clears in about 11.5 months.
• At £80,000 revenue a month, repayments are £8,000, so it takes about 14.4 months.
• In both cases the total repaid is £115,000, and the cost is £15,000.

The cost is the same in pounds, but the faster route is more expensive as an annual rate. A seasonal business might repay £15,000 in a peak month and £5,000 in a quiet one, which is the main benefit of this structure.

Lenders usually size the advance against your recent revenue, often as a multiple of average monthly sales, then adjust it for risk. The exact approach varies between lenders.

• How consistent revenue has been over recent months, and any seasonal pattern
• Gross margin, because thin margins leave less room to share revenue
• For SaaS businesses, recurring revenue, customer churn and renewals
• Refunds, chargebacks and reliance on one marketplace or sales channel
• Existing borrowing and how much revenue is already committed to other lenders

Many lenders offer further funding once part of the first advance is repaid. Our guide on how much a limited company can borrow explains how lenders think about affordability more widely.

Revenue based finance is flexible, but the agreement still sets firm obligations. Check these points carefully.

• Personal guarantee: if directors give a personal guarantee, they may have to repay if the company cannot.
• Minimum payments and long-stop dates: check whether there is a minimum monthly amount or a date by which everything must be repaid.
• Data and account conditions: many agreements treat switching payment processors, closing accounts or disconnecting data as a breach.
• Revenue diversion: you may need consent before changing how or where customers pay you.
• Stacking: taking several revenue-share products at once can tie up a large share of cash. Lenders may restrict further borrowing.
• Affordability: model repayments in your quietest month, after advertising, stock and VAT.

Revenue based finance and a merchant cash advance both use a fixed fee and flexible repayments linked to sales. The main difference is which sales they draw from.

• Merchant cash advance: repaid from card takings, usually through your card terminal provider. It often suits shops, restaurants and other businesses where customers pay by card in person.
• Revenue based finance: looks at wider revenue, including online checkouts, marketplace payouts, bank transfers and subscriptions. It often suits ecommerce and SaaS companies.
• Unsecured business loans: fixed monthly repayments with interest over a set term. Often better value for steady, established businesses that can commit to a fixed payment.
• Revolving credit facility: draw and repay as needed. Useful for recurring, short gaps rather than one planned investment.

Both revenue based finance and a merchant cash advance can cost more than a term loan in annual terms. They suit companies that value flexible repayments over a cheaper fixed structure, or that cannot easily commit to a fixed monthly amount.

Sometimes. Lenders focus mostly on revenue data, so a growing company that is not yet profitable may still qualify if revenue is consistent and margins are healthy. Lenders still check credit and finances.

Most lenders want several months of trading data, and each sets its own minimum trading period and monthly revenue. Adverse credit may reduce the amount offered or rule out some lenders, depending on its seriousness and how recent it is. Each lender makes its own decision.

Funding for limited companies, LLPs and partnerships of four or more partners is generally unregulated, so most Consumer Credit Act protections do not apply. Your rights come mainly from the agreement and any guarantee you sign.

Read the full terms and take independent legal or financial advice if anything is unclear. Our guide to regulated vs unregulated business finance explains more. Welcome Finance is a broker, not a lender, and is not authorised or regulated by the FCA.

We help you compare offers from suitable lenders on our panel, and a dedicated relationship manager works with you by phone, email and chat from first enquiry until the lender pays out.

1. Check your eligibility in about 60 seconds, without affecting your credit score.
2. Talk to your relationship manager about your revenue, margins and what the funding is for.
3. We approach suitable lenders and explain offers in plain English, including fees, revenue share and any minimum payments.
4. You decide whether to apply. The lender runs its own credit checks and makes its own decision.
5. Once approved and signed, the funds are paid out.

We don't charge you a fee. We are paid a commission by the lender when your finance completes, and you can ask how much it will be. Commission can differ between lenders. See how we are paid.

What happens if our revenue falls sharply?

Repayments usually fall with revenue, which eases pressure. If your agreement has a minimum payment or long-stop date, those still apply, so speak to the lender early.

Which revenue counts?

Lenders agree which income is included, such as online sales, marketplace payouts or subscription receipts. Check how refunds and VAT are treated.

Can we repay early?

Usually yes, but the fixed fee often still applies in full. Ask whether the lender offers any discount for early settlement.

Do we need to change payment provider?

Usually not, but some lenders only work with certain platforms or processors, and switching during the agreement may need their consent.

Is revenue based finance secured?

It is often unsecured on property or equipment, although lenders commonly ask for a personal guarantee and some take a debenture.

Can SaaS companies use annual contracts?

Some lenders fund against annual or multi-year subscription contracts, sizing the advance on contracted recurring revenue and customer retention.

Can we take more funding later?

Many lenders offer a further advance once a portion of the first is repaid, subject to a fresh review of your data.

Does it affect our credit file?

Lenders run credit checks when you apply and may report the agreement. Our initial eligibility check does not affect your credit score.

How is VAT treated in the revenue share?

It depends on the agreement. Some lenders collect a share of gross receipts, including VAT, so check how this interacts with your VAT bills.

Can we use it to fund advertising?

Yes, many companies do. Some lenders pay advertising platforms directly, while others pay the advance to your company to use for business purposes.