What is Revenue-Based Financing?
Revenue-based financing (RBF) is a form of non-dilutive capital where a company receives upfront funding and repays it as a fixed percentage of monthly revenue. Repayment continues until a predetermined cap (typically 1.3x to 2.5x the original amount) is reached.
No equity changes hands. No board seats. No valuation negotiation.
Why SaaS Startups Use RBF
Recurring revenue makes RBF a natural fit. Predictable MRR means predictable repayment schedules. Founders use RBF to fund growth without dilution between equity rounds, finance customer acquisition, or extend runway without touching their cap table.
How RBF Terms Work
Typical RBF deals include a repayment cap (the total amount you'll pay back), a revenue share percentage (usually 2-8% of monthly revenue), and a repayment period that flexes based on revenue performance. Good months mean faster repayment. Slow months mean smaller payments.
Formula
- Funding Amount: The capital you receive upfront
- Repayment Cap = Funding Amount x Cap Multiple (typically 1.3x - 2.5x)
- Monthly Payment = Monthly Revenue x Revenue Share %
- Effective Cost = Repayment Cap - Funding Amount
Example calculation:
- Funding: $500K
- Cap multiple: 1.5x
- Total repayment: $750K
- Revenue share: 5% of monthly revenue
- At $500K MRR: monthly payment = $25K
- Repayment timeline: ~30 months
Example
SaaS company at $200K MRR takes $400K RBF deal:
- Cap multiple: 1.4x ($560K total repayment)
- Revenue share: 5%
- Monthly payment at current MRR: $10K
If MRR grows to $400K over 12 months, payments increase to $20K. Total repayment happens faster, but the cost stays fixed at $560K.
Compare to giving up 5-10% equity in a priced round. If the company reaches $50M valuation, that equity would be worth $2.5-5M. The $160K cost of RBF looks cheap.