Revenue-based repayment is a flexible funding option for businesses, especially eCommerce sellers. Instead of fixed monthly payments, you repay a percentage of your revenue, so payments adjust based on your sales performance. Here’s what you need to know:
- How It Works: Borrow funds upfront and repay using 4%-8% of your monthly revenue.
- Key Benefits:
- Payments decrease during slow months and increase during high sales periods.
- No need for collateral or high credit scores.
- Retain full ownership of your business (no equity loss).
- Repayment Cap: Total repayment ranges from 1.5 to 3 times the amount borrowed.
- Duration: Repayment adapts to your sales trends, typically lasting 1-3 years.
| Feature | Revenue-Based Repayment | Traditional Loans |
|---|---|---|
| Payment Flexibility | Adjusts with revenue | Fixed monthly payments |
| Credit/Collateral Needed | Minimal requirements | High credit/collateral needed |
| Ownership Impact | Retain full ownership | May require equity |
| Default Risk | Lower (payments adjust) | Higher (fixed payments) |
This model is ideal for eCommerce businesses with seasonal sales, offering quick access to funds and easier cash flow management. Platforms like Onramp Funds streamline the process, often providing funding within 24 hours.
Revenue-Based Financing: What Is It, and How Does It Work?
Core Payment Mechanics
Revenue-based repayment offers a flexible way to manage payments by tying them directly to your sales, helping to smooth out cash flow challenges.
Payment Calculations
With this approach, a fixed percentage of your gross monthly revenue - typically between 4% and 8% - is used to determine your payment amount. This means your payments will fluctuate in line with your sales performance.
| Revenue Level | Monthly Revenue | Payment % | Monthly Payment |
|---|---|---|---|
| High Season | $100,000 | 6% | $6,000 |
| Average Month | $60,000 | 6% | $3,600 |
| Low Season | $30,000 | 6% | $1,800 |
Once calculated, these payments are automatically deducted on a predetermined schedule.
Payment Timing
Payments are processed automatically through your eCommerce platform on the 15th of each month. They are based on the revenue generated during the prior month.
Payment Limits and Duration
Understanding repayment limits is key to managing overall costs. Revenue-based repayment includes a repayment cap, which usually falls between 1.5 and 3 times the original funding amount. This cap ensures you know the maximum cost upfront while allowing repayment to adjust to your business's performance.
The repayment timeline adapts to your sales trends: higher sales lead to quicker repayment, while lower sales extend the timeline. This structure aligns repayment with your business's seasonal cycles, offering flexibility during slower periods.
Main Advantages for eCommerce Sellers
Revenue-based financing (RBF) offers eCommerce sellers a repayment model that adapts to their sales patterns, providing flexibility and aligning with the natural rhythm of their business.
Seasonal Payment Adjustments
One standout benefit is how repayments adjust during slower sales periods. For instance, if your monthly revenue dips from $100,000 to $30,000, your payments decrease proportionally to match the reduced income. This means you’re not locked into hefty payments during off-peak seasons.
"RBF aligns with your business's natural ebb and flow, allowing for proportional repayments, which can be advantageous during slow months. However, this can mean significantly higher financial obligations during peak seasons." - Hahnbeck
Variable Payment Structure
The flexibility of RBF lies in its variable payment model. Payments are tied directly to your revenue, so during months of lower sales, your financial obligations decrease. This eliminates the stress of fixed payments when sales are unpredictable.
| Aspect | Traditional Fixed Payments | Revenue-Based Payments | Impact |
|---|---|---|---|
| Payment Amount | Fixed monthly payment, no matter revenue | Percentage of actual revenue | Easier cash flow management |
| Risk Level | High obligation during slow periods | Aligned with business performance | Lower risk of default |
| Flexibility | Rigid payment schedule | Adjusts to sales fluctuations | Greater operational freedom |
This approach not only makes cash flow easier to manage but also minimizes the risk of default. It allows businesses to focus on growth without the strain of rigid financial commitments.
Business Growth Options
RBF doesn’t just ease financial pressure - it also opens doors for strategic growth. Sellers can access capital quickly and use it where it counts the most, all while keeping full ownership of their business. Key benefits include:
- Quick access to funds for time-sensitive opportunities
- Freedom to allocate resources across different business needs
- Retention of full ownership without giving up equity
- Reduced personal risk since no personal guarantees are required
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Getting Started with Onramp Funds
Requirements and Application Steps
Onramp Funds offers a straightforward path to securing funding, but there are a couple of basic requirements to meet first:
- Your eCommerce business must generate at least $3,000 in average monthly sales.
- Your business must be incorporated in the United States.
Once you meet these criteria, the application process is designed to be quick and simple. Here’s how it works:
- Step 1: Use the funding calculator to get an estimate of your potential funding.
- Step 2: Securely link your eCommerce platform.
- Step 3: Receive your funds - often within 24 hours of approval.
Once approved, you can integrate your store with Onramp Funds for automated repayment, making the whole process even smoother.
"Applied, got our offer, and had cash in our bank account within 24 hours. Their Austin, TX based team was very professional and helped me deploy the cash to effectively grow our business." - Nick James, CEO Rockless Table
Platform Connections
Onramp Funds connects seamlessly with leading eCommerce platforms, making it easy to integrate and manage your funding. Here’s a breakdown of supported platforms:
| Platform Type | Supported Marketplaces |
|---|---|
| Direct Sales | Shopify, BigCommerce, WooCommerce, Squarespace |
| Marketplaces | Amazon, Walmart Marketplace |
| Social Commerce | TikTok Shop |
| International | SHOPLINE |
In December 2024, Onramp Funds expanded its platform support by partnering with SHOPLINE. This move enables more merchants to access tailored funding options. Integration is secure, using read-only APIs to sync your store and bank account for automated repayment.
Support and Fee Structure
Onramp Funds doesn’t just make the application process easy - they also back it up with a helpful support team and a fee structure that’s clear and upfront. Their Austin-based team is there to assist you every step of the way.
The results speak for themselves: businesses funded through Onramp Funds report an average revenue growth of 60%, and 75% of customers return for additional funding.
"Onramp offered the perfect solution with revenue-based financing to secure the capital we needed to invest in inventory and pay it back at a reasonable time frame once we made sales. The process was quick, easy, and the support was great." - Jeremy, Founder and Owner of Kindfolk Yoga
The fee structure is simple and transparent. There are no hidden costs or personal credit checks. Instead, Onramp Funds evaluates:
- Your sales history
- Your cash flow patterns
- Your current debt positions
This detailed approach ensures you get funding tailored to your business’s needs and growth goals.
Conclusion
Recap of Key Benefits
Revenue-based repayment stands out as a practical funding solution for eCommerce businesses. Its main perks include payments that adjust automatically with sales, offering protection for cash flow during seasonal ups and downs, and the ability to retain full ownership without giving up equity.
The growing popularity of this model highlights its value, with projections showing increased adoption across the eCommerce world. This trend underscores how well it aligns with the funding needs of modern businesses.
With these benefits in mind, the next step is to explore your funding options.
Connect with Onramp Funds
Onramp Funds simplifies the process of securing revenue-based funding. Based in Austin, their team provides personalized guidance, and funding can often be arranged in as little as 24 hours.
| Contact Method | Details |
|---|---|
| Online Calculator | Use the tool at onrampfunds.com to estimate your funding potential. |
| Platform Support | Compatible with Amazon, Shopify, BigCommerce, WooCommerce, Squarespace, Walmart Marketplace, and TikTok Shop. |
| Minimum Requirement | $3,000 in average monthly sales. |
FAQs
What makes revenue-based repayment a flexible option for eCommerce businesses compared to traditional loans?
Revenue-based repayment provides eCommerce businesses with a flexible way to handle financing by linking repayments to a percentage of their sales. With this model, payments automatically adjust based on your revenue - higher sales mean larger payments, while slower sales result in smaller ones. This setup can be especially helpful for managing cash flow during seasonal highs and lows or periods of reduced activity.
Unlike traditional loans, which demand fixed monthly payments regardless of how your business is performing, revenue-based financing eases financial strain and lowers risk. Plus, it usually doesn’t require personal guarantees or collateral, making it a less risky and more flexible option for growing your eCommerce business.
What do I need to qualify for revenue-based funding with Onramp Funds?
To be eligible for revenue-based funding with Onramp Funds, your business needs to meet a few essential requirements:
- Monthly Sales: Maintain an average of at least $3,000 in monthly sales.
- Legal Registration: Be officially registered as a business within the United States.
- Operating History: Have a track record of operating for at least 6 to 12 months.
The application process is designed to be quick and hassle-free. Typically, you’ll fill out a brief application and may need to provide your bank statements from the past three months. Once approved, repayments are tied to your sales performance, offering flexibility and easing the burden of fixed payments, so your business can grow at its own pace.
What is a repayment cap in revenue-based financing, and how does it impact total repayment costs?
In revenue-based financing (RBF), the repayment cap represents the maximum amount a business commits to paying back. This includes the original funding plus any fees. Typically, this cap falls between 1.5 to 2.5 times the borrowed amount. Payments are tied to a percentage of your monthly revenue, meaning they fluctuate with your earnings - higher revenues lead to larger payments, while lower revenues reduce the payment amount. This setup provides flexibility, making it easier to manage cash flow.
When analyzing the total repayment cost, it’s essential to factor in both the repayment cap and your revenue forecasts. Strong revenue months can help you repay faster, while slower months may extend the repayment period. By keeping these elements in mind, you can better plan for repayments without straining your financial stability.
