How revenue financing can help your business grow

Afshan Qureshi
Afshan Qureshi
Content Marketing Manager
Posted on
February 28, 2022
min read
How revenue financing can help your business grow

If your business has a predictable revenue stream, you may be a good candidate for revenue financing. This type of financing is designed for businesses that have contracts with customers that generate regular and predictable revenue streams.

This financing can be used to finance a wide variety of business needs, including startup funding, growth, working capital, and debt consolidation. But how do you know if it’s right for your business? And how do you qualify for revenue financing?

In this blog post, we’ll answer those questions and discuss the basics of revenue financing. But first, we’ll start by looking at some of the traditional funding options you’re probably more familiar with.

Traditional sources of business funding

As a business owner, you’ve probably been there.

You have a new product that’s going to take off overnight. You know it’s a great business idea. The only problem is you don’t have the money to fund your startup.

If the above scenario were true for you, you may consider traditional sources of funding to transform your dream into reality. Here are a few options that may cross your mind:

  • Family and friend loans
  • Bank loans
  • Microloans
  • Angel investors

Another option many people consider is bootstrapping. This is something that can help you as you start your business and when the business is still in its infancy stages—but it’s not feasible for growth. It also limits your ability to grow as fast as you may want because you’re working with limited funding.

Although traditional sources of business funding can pay off for many new companies, they’re not the best option for all. Many founders who want to fund their growth are now considering revenue financing.

This is an attractive option for a lot of startups that struggle with traditional methods of financing. Keep reading to find out more about revenue financing.

What is revenue financing?

Revenue financing is a line of credit backed by recurring revenues from current customers or future contracts. It works similar to working capital loans and other lines of credit, except revenue financing is not dependent on future profits.

This type of financing allows startups to finance their next stage of growth without having to worry about producing profit. It’s like receiving a start-up line of credit that you don’t have to put up collateral for—but gives you the flexibility that most other financing options lack.

Let’s take software as a service (SaaS) companies for an example: these businesses have regular monthly bill payments from their customers. They generate repeated revenue through subscriptions and long-term contracts, giving them certainty in terms of how much revenue they can expect to receive at the end of each month.

This makes SaaS companies a great fit for revenue financing–it prevents them from waiting for customers to make future payments, which is a common issue for service providers.

They know the revenue the business will bring in. So revenue financing can keep them from waiting on payments from customers.

How to get revenue financing

Many financing institutions offer revenue financing with flexible terms. The terms vary, but they're usually based on the needs of your business. 

When applying for revenue financing, the lender will ask you about the average invoice cycle of your customers. Here’s a better look at what you can expect from the process:

You’ll start by completing a short application to verify that there is recurring revenue in place. Then, your lender will request documentation such as cash-flow statements, bank statements, and tax returns.

The more guarantees your company shows with its offerings and customer loyalty, the easier it becomes for an institution to find out how much money they can lend and what interest rates should apply. If this level of predictability isn't present, then the lender has less certainty that you will be able to repay them on time—meaning higher interest rates or even denial of your application.

If approved, the provider can provide you with up to seven times your company’s recurring monthly revenue issued as a line of credit that you can draw down up to your available funding limit (called “revolving invoices”). So, if your recurring revenue is $60,000, then revolving invoices/lines of credit range between $40,000-$180,000.

Partners also offer revenue financing for both short-term (working capital) and long-term (fixed assets).

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How revenue financing is changing startup funding

Revenue financing offers businesses quick access to funds without having to wait for it on a pay-as-you-use basis. This method of financing works well for businesses that need access to capital, but whose cash flow isn't enough to be considered a revolving line of credit.

It also allows you to take advantage of opportunities when they arise without borrowing against your future profits. This type of financing is usually easy to qualify for if you have a business with annual recurring revenue (ARR).

The key factor here is consistency– having reliable customers paying consistently allows lending partners to secure revenue based financing for your business. With this type of financing, lenders look at two main factors – the monthly payment the customer makes and how long that payment lasts. Terms tend to range from 36 months to 60 months.

Grow your business without dilution

In order to take advantage of the many benefits that revenue financing has to offer, you need a consistent source of income from customers who pay on a recurring basis. If you have this kind of cash flow, revenue financing may be a great growth funding option for your business. It’s also an excellent alternative to traditional options like working capital and inventory financing because it enables you to grow much faster.

A solution like Capchase can provide you with the upfront cash flow you need to fund your growth. Our non-dilutive programmatic funding options will allow you to maintain full control over your businesses. You'll get working capital without giving up any equity.


You can learn more about Capchase revenue financing at