Quick answer
Revenue-based finance is funding repaid as a share of your sales, so repayments rise in busy periods and fall in quiet ones. A merchant cash advance is a common version repaid from card takings. It suits businesses with strong card or online sales and uneven months, but the total cost can be high, so convert any factor or fee into total dollars before deciding.
Key points
- Repayments follow sales up and down
- Merchant cash advances are repaid from card takings
- Good for seasonal businesses with strong card revenue
- Compare on total dollars repaid, not the factor
Funding that breathes with the business
A fixed weekly repayment can feel brutal in a quiet month. Revenue-based finance takes a different approach: the provider takes a slice of your sales until the agreed amount is repaid. When sales dip, so do repayments. When sales spike, the balance falls faster. For cafes, retailers, online stores and tourism operators with uneven months, that flexibility can be valuable.
How the main versions work
| Type | Repaid from | Typical user |
|---|---|---|
| Merchant cash advance | A percentage of daily card settlements | Hospitality and retail |
| Revenue-share loan | A percentage of monthly revenue | Online and subscription businesses |
| Flexible-repayment loan | Variable debits linked to deposits | Service businesses |
The cost question
Many revenue-based products are priced using a factor or fixed fee rather than a rate. That makes them look simple, but it can hide the true cost, especially when the balance is repaid quickly in a busy period. The fix is easy: work out total dollars repaid over the amount advanced, then compare with a conventional unsecured business loan or line of credit. The repayment calculator does the arithmetic.
When it is a good fit
- Strong card or online sales with clear seasonal swings.
- A specific short-term purpose, such as stock for a peak season.
- No other daily-debit facilities competing for the same takings.
When to look elsewhere
If margins are thin, the percentage withheld may leave too little for suppliers and wages. If you already carry one or two merchant advances, adding another is a classic route into trouble; consider business debt consolidation instead. For businesses with property, a secured loan is usually far cheaper.
An illustrative comparison
A surf and outdoor store takes most of its revenue on cards and has a very strong summer. It is offered a merchant cash advance with repayments taken as a share of daily card sales. A second option is a conventional short-term unsecured loan with a fixed weekly repayment.
Laid side by side as total dollars repaid, the two offers are close in cost. The advance suits the winter months better because repayments shrink when sales do, while the fixed loan would take the same amount in July as in January. Because the owner has no other daily-debit facilities, the advance works. If she had already been carrying one, consolidating would have been the safer choice.
Reading the contract
Look for the total amount repayable, the percentage of sales withheld, how that percentage is applied on days with refunds or low sales, what happens if you change card providers, and any fees for early settlement. Revenue-based agreements vary widely, so the fine print matters more than usual.
Compare before you commit
Fill in the short form and tell us your typical monthly sales and how they swing. No credit check is run for enquiries, a real lender reads it, and we keep it confidential. Get a fair comparison.
Frequently asked questions
How is a merchant cash advance repaid?
A set percentage of your daily card settlements is withheld until the agreed total has been repaid. Quiet days mean smaller repayments; busy days mean larger ones.
Is revenue-based finance a loan?
It is often structured as a purchase of future receivables rather than a loan, which changes some of the terms. Read the contract carefully and understand the total repayable.
What does a factor of 1.3 mean?
You repay 1.3 times the amount advanced. On $50,000 that is $65,000, regardless of how quickly you repay. Converting to total dollars makes it easy to compare.
Who should avoid revenue-based finance?
Businesses with thin margins, or those already carrying other daily-debit loans, can find the combined drain hard to manage.
Prefer to start now? Enquire here
About 60 seconds. No credit check when you first enquire, and a person who handles unusual deals calls you back.