Revenue Based Financing - The Secret to eCommerce Growth

Revenue Based Financing - The Secret to eCommerce Growth

If you own an eCommerce business, you might have experienced just how difficult it can be to acquire funds through traditional means.

Banks simply aren’t caught up with how the Internet works, even to this day.

Try walking into a bank and getting a loan to grow your eCommerce business, and they will almost certainly turn you down.

They simply don’t have the capability to measure how well your business is doing or your ability to pay it back. They don’t know how.

But luckily, today there is a solution to this problem, and it’s called Revenue Based Financing.

What is Revenue Based Financing?

Revenue Based Financing is a unique form of funding that assesses your ability to repay the loan amount based on the revenue generated from your business.

What is unique about Revenue Based Financing?

Revenue based financing doesn’t look at your credit score, require you to put up collateral, or give up any equity of your business. It instead looks at the revenue generated from your business to judge your ability to pay back the loan.

Because of this, revenue based loans often differ from traditional loans in their function, purpose, loan amount, and terms.

A few ways revenue financing is unique:

No credit scores involved

Revenue financing doesn’t work off credit scores, either from your business or you, to qualify for funding.

This is a good thing for a lot of newer businesses who haven’t established much of a credit history.

Smaller loans with faster payback periods

With revenue financing, you will typically see smaller loans than with your traditional business loans.

This is due to many factors:

  • The focus of the use-of-funds for revenue financing is more precise, usually core business functions like product restocking.
  • Using revenue as the main metric for loan payment ability can be riskier than traditional ways of financing.
  • Since there is more risk, lenders need to be paid back faster.

Less oversight with Revenue Financing

Since there’s no equity involved, your lender doesn’t necessarily “care” what you do with your funds, just that you use it to contribute toward your revenue.

For eCommerce businesses, this typically means funds go towards things like restocking products, launching new products, advertising, or other core business functions.

What Revenue Based Financing Funds are Typically Used For

Since we’ve established that revenue based funding is for smaller amounts that are paid back faster than traditional loans, the funds are typically used for short-term needs that directly contribute to revenue growth.

That means you wouldn’t use this form of funding to build a second restaurant, or hiring a sales team, moving to a bigger warehouse, or things of that nature.

For eCommerce businesses, revenue based funding will usually help make purchase orders for restocking, launching new products, running advertising campaigns, or anything else that contributes to keeping your revenue flowing and growing.

What does repayment look like for Revenue Based Financing?

Traditional loans typically work on interest (APR) and have a longer payback period, 12 months into many years.

Revenue funding has a faster payback period, which is well suited for eCommerce businesses that restock 2-4 times per year.

With a traditional loan, it’s easy to get stuck into a cycle of debt due to not paying off loans quickly enough.

With revenue based funding, cost is calculated in the form of fees based on metrics other than interest, things like a percentage of sales, or a percentage of your current balance.

While in the end you can calculate both loan types to a total % of sales, % of balance, or work out some kind of APR, revenue based financing typically comes out to an overall better APR due to the shorter pay-back period.

How do I get Revenue Based Financing for my eCommerce business?

If you sell online, a lot of the time you are selling through a store software platform like Shopify;, or you’re a seller utilizing Amazon FBA.

When you apply for revenue based financing, the company you’re applying for can connect to your storefront on whichever platform you sell and gather your sales data to determine your revenue and generate a cash offer.

At Onramp Funds, you can sign up and apply to get a cash offer in as little as 2 hours (unless you’re applying Saturday night at 2AM, then you’ll probably have to wait until Monday).

That’s remarkable speed compared to traditional loans.


This should give you a better understanding about revenue based financing and how it differs from other types of funding.

If you run an eCommerce business, this form of funding can be exactly what you need to grow at the rate you need in today’s competitive landscape and prevent your product catalog from ever going out of stock.