Revenue-Based Financing: The Fast Track for Growing Tech Businesses
- MD Finance Team
- Apr 6
- 3 min read
For early-stage and growth-focused businesses navigating between giving up equity and taking on rigid debt, revenue-based financing (RBF) is a practical and flexible funding model. Unlike traditional debt or equity financing, RBF enables companies to raise capital and repay it gradually through a fixed percentage of monthly revenues.
This method ensures that repayments align with business performance, avoiding the financial strain often associated with fixed loan terms.
However, what makes RBF so appealing – and what should founders know before diving in? Let’s explore how RBF works, why it's gaining popularity, and what the global market looks like today.
Revenue-based financing is a powerful option for companies looking to scale without giving up equity or taking on traditional debt. RBF can quickly deliver the capital for various business needs if a company’s revenue is steady and margins are strong.
While the sector is still young, it is projected to grow as RBF gains wider acceptance as a financing model despite the non-unified regulation. Key drivers include increasing investor interest in non-dilutive financing, the rise of subscription-revenue businesses, and greater availability of data/analytics to underwrite revenue-based deals.
Product Overview
Under an RBF agreement, companies raise capital and repay the investment until a fixed return is achieved – usually about 20% above the principal. The process is straightforward: a company connects its revenue data (e.g., from Stripe or Xero), selects an offer, and begins repayments directly from its monthly revenue. Gained capital can be utilized to expand sales, capture market size, pay debts, invest in R&D, and more.
RBF is often used by SaaS and e-commerce businesses with recurring revenue streams. Providers may offer capital of up to 50% of a company’s current annual recurring revenue (ARR), and financing can be approved in as little as one week. Eligibility requirements are generally based on revenue predictability, not personal guarantees or collateral.
Pros of RBF:
No equity dilution (founders and directors keep full control)
No personal founders’ guarantees
Flexible repayments that align with business performance
Cheaper than equity (initial investment from angel investors or VCs)
Lightning-fast funding – sometimes within 24 hours
Cons:
Can be more expensive than traditional bank loans
Can strain cash reserves if expenses are high
Only available to businesses with significant revenue
Market Drivers and Trends
The RBF market is expected to grow at a compound annual growth rate (CAGR) of 39.4%. This increase is explained by increased interest in non-dilutive funding, the rapid growth of SaaS businesses, and better data analytics for evaluating repayment potential.
Partnerships between RBF platforms and payment service providers are also on the rise. For example, European providers like YouLend and Liberis have collaborated with platforms like Tpay and Paytrail to provide online sellers with tools that enable quick and flexible access to capital.
Dozens of RBF platforms operate worldwide. North America and Europe are the two biggest markets, and the APAC and LATAM regions are also emerging. The median age of these startups is around 5-6 years, highlighting how young but fast-moving the sector is.
Venture capital firms have invested $7.4 billion over the past eight years despite relatively few profitable RBF companies.
Regional Snapshots
North America remains the largest RBF market, with prominent players such as Pipe and Capchase, both valued at $2B in 2021. Financing amounts typically range from $10K to $10M. Local companies operate as fintech lenders and are often not required to hold specific banking licenses, though many comply with commercial lending laws at the state level.
Europe is home to 24 major RBF players, including the unicorn Wayflyer, which was valued at $1.6B and recognized as Ireland’s fastest-growing startup in 2024. While companies like Fleximize and YouLend operate under full regulatory licenses, others like Uncapped do not provide licensing details but follow local lending frameworks. Typical eligibility requires monthly revenue starting at €10K and a business track record of 3 to 12 months.
The Asia-Pacific region has seen the rise of companies like GetVantage, Jenfi, and Velocity. These firms offer funding ranging from $5K to $10M, primarily targeting SaaS and digital businesses. While most APAC providers do not hold direct lending licenses, they often partner with RBI-regulated non-banking financial institutions or operate under commercial contract laws, particularly in India and Southeast Asia.
RBF in LATAM is a relatively new niche, with a few emerging players such as Fairplay (Mexico) and A55 (Brazil). Most operate under non-bank financial licenses or crowdfunding regulations. The sector is expected to grow as access to SME financing remains a significant challenge in the region.
Discover more about revenue-based financing key players, download the full report here:
