Revenue-based finance explained

How revenue-based finance works

With revenue-based finance (RBF), a lender advances a lump sum and you repay it by handing over an agreed percentage of your monthly revenue until you have paid back a fixed multiple of the advance — say 1.1 to 1.5 times. There is no interest rate in the traditional sense and no fixed monthly instalment. Instead, the total you will repay is set at the start, and how long it takes depends on how fast revenue comes in.

The defining feature is that repayments flex with trading. In a strong month you pay more and clear the balance faster; in a quiet month you pay less and take longer. The amount owed does not grow with time — only the agreed multiple is ever due — so a slow patch stretches the term rather than inflating the cost. That makes it popular with businesses whose revenue is uneven but generally rising, particularly online and subscription models.

How it compares to a merchant cash advance

RBF is a close cousin of the merchant cash advance (MCA), and the two are easy to confuse. Both advance a lump sum repaid as a slice of takings against a fixed multiple. The difference is the base they take from:

In short: an MCA is the right shape when most of your income arrives by card terminal, while RBF suits businesses whose revenue comes through bank transfer, direct debit or a payment platform rather than a till. The cost logic — a factor on the advance, not an interest rate — is essentially the same.

How it compares to a term loan

Against a term loan, the trade-off is flexibility versus cost certainty. A term loan gives you a known rate and a fixed instalment every month regardless of how trading goes — predictable, usually cheaper in pure cost terms, but unforgiving in a downturn. RBF charges a fixed total via the multiple and lets repayments breathe with revenue, which protects cash flow in lean months but typically costs more overall than a competitively priced loan.

Because RBF is priced as a multiple rather than an annual rate, compare the total pounds repaid and the likely timeline, not a headline percentage. A 1.3x multiple repaid quickly is very different in real cost from the same multiple repaid slowly. Run both options through the true cost of borrowing calculator before deciding.

When it fits — and the cleaner alternative

RBF suits a growing business with variable but trending revenue that values protecting cash flow over minimising headline cost — and that would rather not give a personal guarantee or pledge assets. It is well matched to e-commerce and subscription firms whose income scales month to month.

If your revenue is steadier and you want the lowest total cost, a fixed-term facility is usually the cleaner, cheaper choice. Credicorp lends to limited companies with transparent, fixed pricing and no personal guarantee, so you keep cost certainty without putting your personal assets on the line. You can compare our business loans or register to apply. This guide is educational, not financial advice.