Revenue-based finance
A lump sum repaid as a fixed share of your monthly revenue until an agreed total is paid back. Payments fall when sales fall, but the total is fixed, so repaying quickly makes it very expensive.
L4 · Expensive or fastRegulation dependsLast checked: October 17, 2026Something wrong or out of date?
Cost band
L4
Expensive or fast
Speed
Days
Amount
Varies
Term
Until the agreed total is repaid, which depends on your revenue
Ownership
No shares given up
Security
- Personal guarantee likely
How it works
A provider pays you a sum now. You repay it, plus a fee, as a percentage of your sales or revenue, usually taken automatically from your bank account or payment processor, until you have paid an agreed total. When revenue is high you repay faster; when it drops, payments drop too. Some contracts take fixed payments and adjust them to a share of revenue later (a true-up or reconciliation). State laws call all of these "sales-based financing."
Because the total is fixed when you sign, the yearly cost depends on how fast you repay: the same fee repaid in six months costs roughly twice as much a year as when it is repaid over twelve. Ask for the estimated APR, or work it out, before you compare offers.
Read the contract for:
- The total repayment and the amount you actually receive after any fees.
- The share of revenue taken, how revenue is measured, and how often payments are collected.
- The estimated term and what happens if revenue is much lower than expected.
- Security and guarantees: some providers take a security interest in business assets or ask for a personal guarantee.
- Early repayment: whether paying off early reduces the total.
Federal and state rules: federal Truth in Lending rules do not cover business finance, and the FTC Act bans unfair or deceptive practices. Many states now require providers of sales-based financing to disclose the cost before you sign, and some require an estimated APR; see the state rules below.
Upsides and downsides
Upsides
- Payments fall when revenue falls
- No shares given up
- Quick to arrange, based on revenue data rather than assets
Downsides
- Expensive, especially when repaid quickly
- Takes a share of revenue before you can use it
- Outside the states with disclosure laws, the cost can be hard to compare with a loan
Risks
- A long slow patch stretches repayments, and some contracts set minimum payments
- Taking more financing to keep up with payments can lead to a debt spiral
- A personal guarantee or security interest puts assets at risk if you default
What it costs
- How it is priced
- A fixed total to repay (the amount advanced plus a fee), collected as a share of revenue
- Costs that are easy to miss
- The faster you repay, the higher the yearly cost
- Fees taken out of the amount advanced
- Repaying early may not reduce the total owed
Usually based on your recent monthly revenue.
Have an offer? Cost of a merchant cash advance or revenue-based finance: work out the estimated APR and total cost
Does it fit?
Could fit when
- You have steady revenue and need money for growth, such as marketing or stock
- A bank has turned you down, but your revenue is regular
Unlikely to fit when
- The business has no revenue yet
- A bank, SBA or community loan or line of credit could cover the need
- Your margins are thin or the business is making a loss
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative
- Needs sales (revenue)
- Regular, recurring revenue that the provider can see in your bank or sales data
Am I ready?
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Ready
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Next to prepare
- Revenue records
- True cost worked out
- Contract checked
Regulation and protections
Regulators: Federal Trade Commission (FTC); State lending and financial regulators.
Who runs it: Private providers, nationwide.
Federal Truth in Lending rules do not cover business finance. The FTC Act bans unfair or deceptive practices. Protections depend on your state; see below.
Rules that differ by state
- California: A provider that is not a bank or credit union must give you a disclosure before you sign an offer of $500,000 or less, showing the funds you get, the total dollar cost, the estimated term, the payments, the prepayment rules and an estimated APR, and must get your signature on it. The law covers purchases of a business's future receivables and cash receipts as well as loans. Since January 1, 2026, a provider that quotes a price during an application must also state the APR. (California Financial Code, Division 9.5: Commercial Financing Disclosures (sections 22800 to 22807); DFPI: commercial financing disclosure regulations effective December 9, 2022)
- New York: A provider that is not a bank or other financial institution must disclose, when it makes a specific offer of sales-based financing of $2.5 million or less, the amount you get, the finance charge and an estimated APR calculated under federal Truth in Lending rules from your projected sales. Financing repaid as a percentage of revenue counts as sales-based financing. (New York Financial Services Law section 801: definitions (sales-based financing); New York Financial Services Law section 802: exemptions; New York Financial Services Law section 803: sales-based financing disclosures)
- Virginia: Providers and brokers of sales-based financing, which includes financing repaid as a percentage of revenue, must register with the State Corporation Commission. For a business based in Virginia, a provider must disclose, with each offer of $500,000 or less, the amount, the finance charge, the total repayment, the estimated number of payments, other fees, any collateral or security interest, and any payment to a broker. Confessions of judgment are not allowed. (Code of Virginia, Chapter 22.1: Sales-Based Financing Providers (sections 6.2-2228 to 6.2-2238))
- Utah: A provider that makes more than five commercial financing deals a year in Utah must register with the state and, before you sign a deal of $1 million or less, disclose the funds you get, the total you will pay, the total dollar cost, the payments (or the estimated first payment, if payments vary) and any prepayment costs. The law covers loans and purchases of receivables. No APR is required. (Utah Code Title 7, Chapter 27: Commercial Financing Registration and Disclosure Act)
- Florida: For deals of $500,000 or less made since January 1, 2024, a provider that is not a federally insured bank or credit union must disclose in writing, at or before signing, the funds provided, the amount actually paid out, the total you will pay, the total dollar cost, how payments are worked out and any prepayment costs. The law covers loans and purchases of receivables. No APR is required. (Florida Statutes, chapter 559, part XIII: Florida Commercial Financing Disclosure Law (559.961 to 559.9615))
- Texas: Since September 1, 2025, providers and brokers of commercial sales-based financing, which includes financing repaid as a percentage of revenue, must register with the Office of Consumer Credit Commissioner; those already in business then have until December 31, 2026. Offers of less than $1 million need cost and payment disclosures that you sign. Confessions of judgment are void, and a provider can set up automatic withdrawals from your bank account only if it holds a first-priority security interest in that account. (Texas HB 700 (2025), enrolled: Finance Code Chapter 398, commercial sales-based financing)
- Connecticut: Since July 1, 2024, a provider of sales-based financing of $250,000 or less (repaid as a share of your sales or revenue, or by fixed payments adjusted to a share of sales) must give you, with each specific offer, a disclosure in the state's format showing the amount, the amount paid out, the finance charge, the total repayment, the estimated term, the payments, other fees, prepayment charges, any collateral and any payment to a broker, and get your signature on it. No APR is required. Providers and brokers must register with the Department of Banking. An offer cannot be withdrawn or changed until midnight on the third day, except after underwriting checks or at your request, and the contract cannot waive your right to notice and a court hearing before the provider seizes assets. Banks and credit unions are exempt. (Connecticut General Statutes, chapter 669, part XVI: commercial financing (sections 36a-861 to 36a-872); Connecticut Department of Banking: guidance on Public Act 23-201 (June 10, 2024, updated August 1, 2024))
- Georgia, Kansas: Since January 1, 2024 in Georgia and July 1, 2024 in Kansas, a provider that makes more than five commercial financing deals a year in the state must disclose, before or when you sign a deal of $500,000 or less, the funds provided, the amount actually paid out, the total you will pay, the total dollar cost, the payments and any prepayment costs. No APR is required. The law covers purchases of a business's receivables as well as loans. Banks and credit unions, and financing secured by real property, are not covered. Brokers may not charge you an upfront fee. The state attorney general enforces the law; it gives you no right to sue. (Georgia SB 90 (2023), as passed (Act 78): commercial financing disclosures, O.C.G.A. 10-1-393.18; Georgia General Assembly: SB 90 (2023-2024 session), status history (Act 78, effective January 1, 2024); Kansas Statutes 75-783: Commercial Financing Disclosure Act, definitions (2024); Kansas Statutes 75-784: required disclosures (2024); Kansas Statutes 75-785 to 75-787: exceptions, brokers and penalties (2024))
- Missouri: A provider that makes more than five commercial financing deals a year with Missouri businesses must disclose, at or before signing a deal of $500,000 or less, the funds provided, the amount actually paid out, the total you will pay, the total dollar cost, the payments and any prepayment costs. No APR is required. The law covers purchases of a business's receivables as well as loans. Banks and credit unions, financing secured by real property, and leases are not covered. Brokers must register with the Division of Finance and hold a $10,000 bond. The law's start date was February 28, 2025, unless the Division chose to make rules first; the Division publishes the registration form under it. The attorney general enforces the law; it gives you no right to sue. (Revised Statutes of Missouri 427.300: Commercial Financing Disclosure Law; Missouri Division of Finance: consumer credit licensing (commercial financing registration and bond forms))
Types of provider: Revenue-based finance providers; Online lenders and finance companies; Payment and e-commerce platforms that offer financing to their sellers.
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 17, 2026.
Sources
- New York Financial Services Law section 801: definitions (sales-based financing) · checked October 17, 2026
- Connecticut General Statutes, chapter 669, part XVI: commercial financing (sections 36a-861 to 36a-872) · checked October 17, 2026
- FTC Business Blog: Looking for small business financing? Read this first (June 10, 2020) · checked October 17, 2026
- 12 CFR 1026.3 (Regulation Z): exempt transactions, including business credit · checked October 17, 2026
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