What is revenue based financing? A UK SME explainer
Revenue based financing, in plain English: how repayments flex with cash receipts, who it suits and how to size a facility against trading.
The mechanic
Revenue based financing (RBF) is capital advanced against forward revenue. Repayment is calibrated as a small share of top-line cash receipts. In a strong month you service more; in a quiet month you service less.
Unlike merchant cash advance, RBF isn't limited to card volume, bank receipts, platform payouts and ecommerce settlements all count.
Who it suits
RBF is well suited to ecommerce, subscription, DTC and platform-led businesses where revenue can be verified through Open Banking and payout files. Operators with sharp seasonality often prefer RBF over a fixed term loan because cash flow stress is dampened in slower months.
What it costs
RBF is priced as a factor: a fixed amount repaid in total, with the share-of-revenue rate determining how quickly the facility services down. Total cost is known and disclosed at offer.
Facility sizing
Indicatively, RBF facilities are sized between one and two months of verified top-line revenue, with stronger trading and longer history supporting larger amounts.
Test whether flexible repayment is genuinely useful
Map eligible revenue
Identify which receipts count under the agreement. Card settlements, marketplace payouts and bank transfers may not all be treated in the same way.
Model three revenue cases
Calculate deductions at weak, expected and strong monthly revenue. Confirm whether there is a minimum payment, fixed end date or reconciliation mechanism.
Check the growth return
Use contribution margin after advertising, fulfilment, refunds and tax. Revenue growth without enough cash contribution may not support the facility.
Application checklist
- Revenue definition in the agreement
- Collection percentage
- Fixed fee and total repayable
- Minimum or maximum payment
- Early-settlement terms
- Platform and bank data required
Useful primary and industry references
These references support further research. Product terms and official guidance can change.
Frequently asked
Is RBF debt?
Yes. RBF is a debt facility with a contractual obligation to repay. It does not dilute equity.
Can I prepay early?
Most RBF facilities allow early settlement. Total cost is fixed at offer, so early repayment generally doesn't change the headline amount.
