What Is Revenue-Based Financing?
Revenue-based financing is an alternative to loans or cash advances. Instead of fixed daily or monthly payments, a business agrees to share a portion of its revenue, often collected through ACH debits, until the total repayment reaches a set multiple of the original funding.
In MCA and small business lending, RBF is used for businesses with consistent but variable revenue streams, such as e-commerce companies, subscription-based businesses, or merchants with strong seasonal sales.
Brokers use it to expand financing options for merchants, while funders use it to align repayment with actual performance.
How Does Revenue-Based Financing Work?
RBF links repayment directly to revenue, so payments rise and fall with sales.
- Funding provided: A business receives an upfront investment or advance.
- Revenue share: A percentage of revenue (e.g., 5–10%) is paid to the funder each cycle.
- Repayment cap: Payments continue until the business repays the principal plus an agreed multiple (such as 1.3× or 1.5×).
- Completion: Once the cap is reached, payments stop, and the contract ends.
In Heron, RBF eligibility and monitoring are supported through cash-flow analysis.
- Statement parsing: Bank statements are scrubbed to identify revenue trends and deposit consistency.
- Risk checks: NSFs, overdrafts, and external debt are flagged to assess repayment capacity.
- Eligibility scoring: Clean, structured fields are written back into CRM records for fast underwriting.
- Next action: Underwriters receive underwriting-ready packets showing revenue stability and ability to support RBF repayment.
This enables funders to quickly evaluate whether a merchant is a good candidate for RBF.
Why Is Revenue-Based Financing Important?
For brokers and funders, revenue-based financing is important because it offers a flexible funding option for merchants who may not fit traditional loan programs. It aligns repayment with business performance, reducing the pressure of fixed payments during slower sales periods.
Heron enhances RBF workflows by automating cash-flow analysis and providing structured financial insights. This reduces manual review and speeds up decision-making for high-volume RBF pipelines.
Common Use Cases
Revenue-based financing is applied across lending environments where revenue is variable.
- Funding e-commerce merchants with seasonal or fluctuating sales.
- Offering alternatives to traditional loans for businesses without collateral.
- Using ACH revenue splits for simple repayment mechanics.
- Assessing eligibility with cash-flow parsing and risk flagging.
- Comparing RBF offers alongside MCAs to give merchants flexible options.
FAQs About Revenue-Based Financing
How does Heron support revenue-based financing workflows?
Heron parses bank statements to identify revenue patterns, calculates average daily balances, and flags risks like NSFs or overdrafts, enabling fast and accurate eligibility checks.
Why is revenue-based financing valuable for MCA brokers and funders?
It expands the range of funding products brokers can offer, while giving funders repayment structures that align with merchant performance.
What outputs should teams expect from RBF automation in Heron?
Teams can expect structured CRM fields with revenue metrics, risk signals, and underwriting-ready packets that make RBF decisions faster and more reliable.