# Revenue-Based Financing

## Quick Definition

Non-dilutive capital where repayment is a percentage of monthly revenue until a predetermined cap is reached.

## 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.