What is revenue-based finance?

Revenue based financing is a type of business finance where instead of making fixed monthly repayments, you repay the loan from a percentage of your revenue each month, meaning repayments rise and fall in line with how your business is performing.

It's a model that's become more popular with younger, fast-growth businesses, especially if they have a strong but unpredictable monthly income, like ecommerce or subscription businesses. However, it isn’t the only way to access flexible funding, and it's worth understanding exactly how it works before deciding if it's right for you.

How does revenue based financing work?

With revenue based financing, a lender provides a lump sum of funding in exchange for a fixed percentage of your future revenue, repaid monthly until the agreed amount (plus a fee) is paid back in full. The exact percentage and total repayment amount varies by provider, but the idea behind it is the same: a good month means a bigger repayment, a slower month means a smaller one.

Unlike a traditional loan, there's no fixed term and no fixed monthly amount. Repayments are tied directly to your sales, which can make this option appealing for businesses with seasonal or unpredictable income.

Advantages of revenue based financing

The obvious advantage is that repayments flex with your income, easing the pressure in slower months. There’s no fixed monthly payment to budget around if your revenue is feeling tight. They also can be quick to arrange, and often have less rigid eligibility criteria than other types of traditional finance.

Revenue based funding doesn’t usually mean giving up equity in your business. They can also suit businesses that have a limited trading history but have strong recent revenue, giving newer business the advantage.

Disadvantages of revenue based financing

The disadvantages of revenue based financing is that the total cost can be harder to predict over time than a fixed-rate loan. It also means that a great trading month means larger repayments, which can take a bit of getting used to, and can work out more expensive than other forms of finance (depending on the terms).

It’s less established in the UK market too, which can mean less choice and standardisation between products and providers.

Who is revenue based financing suited to?

Revenue based financing tends to suit businesses with high, predictable transaction volume but a shorter trading history - think ecommerce brands, subscription services or app-based businesses. If your revenue comes through a single, trackable channel and fluctuates month to month, the flexible repayment structure can feel like a natural fit.

It's less suited to businesses that want predictability, or those whose revenue doesn't flow through an easily trackable platform. So bear that in mind if you’re thinking about revenue based funding.

Revenue based financing vs a business loan

For businesses that want predictable repayments, business loans offer fixed monthly installments, making it far easier to plan ahead and budget with confidence. Rather than a percentage of revenue, you know exactly what you'll repay and when, for the full term of the loan. 

For businesses that want flexibility without tying repayments to revenue, FlexiPay spreads costs into fixed installments with a flat fee, giving you more control over cash flow without the uncertainty of a revenue-linked repayment. Find out more about your business options in our article: what is the right finance for your business?

If predictability and clarity matter to your business, a fixed-rate loan or flexible credit line is likely to be a simpler, more transparent option. Discover how Business Loans can help to support your business growth.

FAQs

How much can you borrow with revenue based financing?

This varies by provider, but funding amounts are usually based on a multiple of your average monthly revenue, rather than a fixed lending limit. Your provider will be able to give you a more specific idea based on your finances.

Is revenue based financing the same as a merchant cash advance?

They're closely related and often used interchangeably, but a merchant cash advance is usually specifically tied to card sales, while revenue based financing can be based on revenue across multiple channels.

Does revenue based financing affect my credit score?

This depends on the provider and how the agreement is structured, so make sure you understand this if you decide to go for revenue based financing. As with any form of finance, it's worth checking with the provider directly before applying.

Disclaimer

16/07/2026 – While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. All information is correct at time of publishing, and customers should do their own research before making financial decisions. If you have any questions, please speak to your professional adviser or seek independent legal advice.