Revenue-based financing (RBF) is a funding model where businesses receive upfront capital and repay it as a percentage of their monthly revenue. Payments automatically adjust based on sales performance - rising during strong months and decreasing during slower periods. This flexibility makes RBF particularly useful for eCommerce businesses with seasonal sales patterns or growth needs.
Key Benefits of RBF:
- Quick Access to Funds: Receive funding within 24 hours.
- Flexible Payments: Payments scale with your sales.
- No Equity Loss: Retain 100% ownership of your business.
- No Collateral Required: Approval is based on sales data, not credit scores.
- Growth Potential: Businesses often see up to 60% revenue growth within 180 days.
Who Qualifies for RBF?
- Minimum $3,000 in monthly sales.
- Legal US business entity (LLC, C-Corp, S-Corp).
- Connected to platforms like Shopify, Amazon, or Walmart.
RBF is ideal for eCommerce businesses looking to invest in inventory, marketing, or expansion without sacrificing ownership or taking on rigid repayment terms.
RBF Mechanics and Process
How to Qualify and Get Funding
Revenue-based financing offers a simple way for growing eCommerce businesses to secure funding. To qualify, businesses must meet these criteria:
| Requirement | Minimum Criteria |
|---|---|
| Monthly Revenue | $3,000 average |
| Business Structure | Legal US entity (LLC, C-Corp, S-Corp) |
| Platform Integration | Supported marketplace connection |
| Store Access | Read-only store analytics |
The application process is designed to make funding decisions quickly. Nick James, CEO of Rockless Table, shared his experience:
"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".
Payment Structure
Payments are directly tied to your sales, making them flexible and manageable:
- Payments automatically adjust based on sales volume
- Payments occur only when sales deposits are made
- A clear fee structure ranging from 2-8%, depending on your business profile
- No hidden costs or unexpected fees
Additionally, secure platform connections simplify data access and automate the repayment process.
Platform Connections
Secure platform connections are key to evaluating and processing funding. Supported platforms include:
| Platform Type | Supported Marketplaces |
|---|---|
| Major Marketplaces | Amazon, Walmart Marketplace |
| eCommerce Platforms | Shopify, BigCommerce, WooCommerce |
| Website Builders | Squarespace |
| Social Commerce | TikTok Shop |
Adam B. of The Full Spectrum Company highlighted the ease of the process:
"Onramp's process is very straightforward and easy to navigate. I had funds in my account within a day of final approval".
Platform integration offers several key benefits:
- Automated Analysis: Quickly evaluates business performance
- Direct Integration: Connects to sales data seamlessly
- Secure Access: Ensures read-only analytics for safety
- Automated Payments: Makes repayment hassle-free and efficient
Revenue-Based Financing: What Is It, and How Does It Work?
Main RBF Advantages
RBF (Revenue-Based Financing) brings several benefits to eCommerce businesses, offering a flexible and growth-friendly way to secure funding.
Growth Funding Without Giving Up Ownership
One of the standout benefits of RBF is that it allows businesses to secure capital without giving up any ownership. Unlike equity financing, where you trade a portion of your company for funding, RBF lets you keep 100% control. This is especially useful for businesses needing funds for inventory or marketing, as it provides the resources to grow without sacrificing decision-making power.
Payments That Match Your Sales
RBF payments adjust automatically based on your sales. Instead of fixed monthly payments, the system ties payments to your revenue, creating a more manageable structure. Here's how it works:
| Payment Feature | Business Benefit |
|---|---|
| Sales-Based Adjustments | Payments decrease when sales slow down |
| Deposit Timing | Payments align with incoming sales deposits |
| Cash Flow Protection | Helps preserve working capital during dips |
| Predictable Structure | Transparent, percentage-based fee system |
This approach ensures that businesses can maintain healthy cash flow, even during slower periods, while benefiting from a clear and predictable payment system.
No Collateral Required
RBF doesn’t require collateral or personal guarantees, unlike traditional bank loans. Instead, funding decisions are based on your business's performance and sales metrics. This makes it an appealing option for eCommerce businesses that may not have physical assets to offer as collateral.
The qualification process focuses on:
- Sales history and revenue trends
- Verified cash flow patterns
- Integration data from platforms like Shopify or Amazon
- Overall business performance metrics
This data-driven approach speeds up funding decisions while reducing risk, making it a great fit for digital-first eCommerce brands.
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RBF Risks and Planning
Understanding RBF Costs
Revenue-based financing (RBF) costs adjust based on your business's performance, meaning payments increase when sales are high and decrease during slower periods. This flexibility helps manage cash flow more effectively.
| Sales Scenario | Payment Impact | What to Keep in Mind |
|---|---|---|
| Peak Season | Payments rise alongside sales | Be prepared for higher payment amounts |
| Off-Season | Payments drop with reduced revenue | Helps maintain cash flow stability |
| Growth Period | Payments grow as revenue increases | Supports business expansion without added pressure |
| Slow Period | Payments decrease during sales slumps | Keeps working capital intact |
By understanding these costs, you can better plan your payments to keep cash flow steady.
Payment Planning
Because payments adjust with your sales, RBF offers built-in flexibility during slow months. However, staying on top of your financial commitments is crucial to avoid surprises.
Here’s how to manage your payments effectively:
- Keep track of seasonal sales trends and cash flow to predict and adjust for payment changes.
- Strategically plan investments in areas like inventory, marketing, or expansion to align with your payment capacity.
Contract Terms to Check
Before committing to RBF, review these critical contract details:
-
Revenue Calculation Method
Make sure you understand how your revenue is calculated. Check whether all sales channels and revenue streams are included and how they impact your payments. -
Payment Structure
"We evaluate your sales history, cash flow needs, and debt positions to make you an offer that fits with your cash flow capability. We structure your financing to ensure you're not putting your business at risk with too much debt."
– Onramp Funds -
Platform Integration
Confirm that your eCommerce platforms are compatible with the provider’s tracking and payment systems. This ensures accurate repayment calculations based on your actual sales. Companies like Onramp Funds integrate with platforms such as Amazon, Shopify, BigCommerce, WooCommerce, Squarespace, Walmart Marketplace, and TikTok Shop, making the process seamless and reliable.
Making the RBF Decision
Main Points Review
Let’s break down the key advantages of revenue-based financing (RBF) to help you decide if it’s the right fit for your business. With a minimum requirement of $3,000 in monthly sales, RBF offers a funding option that works in sync with your business's cash flow.
| Key Benefit | Business Impact |
|---|---|
| Quick Access | Get funding within 24 hours |
| Sales-Based Payments | Payments adjust automatically based on your revenue |
| Platform Integration | Compatible with platforms like Amazon, Shopify, and Walmart |
| Growth Potential | Average 60% revenue growth within 180 days |
| Ownership Control | Retain 100% equity in your business |
Now that the benefits are clear, let’s explore when RBF can make the most sense for your business.
Best Times to Use RBF
RBF is a great option when you need fast capital without giving up equity. Here are the key scenarios where it shines:
Inventory Investment Opportunities
RBF allows you to quickly access funds to stock up for busy seasons or take advantage of bulk purchase discounts. You can repay the funding with sales generated from these investments.
Marketing and Growth Initiatives
Planning to scale your marketing efforts or enter new sales channels? RBF provides the flexibility to fuel these growth strategies. Nick James, CEO of Rockless Table, shares his experience:
"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"
Seasonal Business Needs
If your business has seasonal highs and lows, RBF’s adjustable payment structure can help you manage cash flow. Torrie V., Founder of Torrie's Natural, highlights this benefit:
"Onramp has simplified cash flow by automating everything: easy to request, set it and forget it payments - quick and fast!"
RBF works best for eCommerce businesses with steady sales and a clear need for extra capital. To maximize success, ensure you have:
- A well-defined investment plan
- Consistent monthly revenue
- Connected sales channels
- Strong potential for growth
- A need for quick funding
FAQs
What makes revenue-based financing different from traditional loans in terms of risk and repayment flexibility?
Revenue-based financing stands out because it adjusts repayments based on your business's earnings. Instead of fixed monthly payments like traditional loans, repayments are calculated as a percentage of your sales. This means during slower months, your payments decrease, reducing financial strain.
Traditional loans, on the other hand, often require fixed payments regardless of your revenue, which can be challenging during periods of low sales. Revenue-based financing provides greater flexibility and aligns repayment with your business's performance, making it a practical option for growing eCommerce businesses.
What are the risks of using revenue-based financing for my eCommerce business?
Revenue-based financing can be a great option for many eCommerce businesses, but it’s important to understand the potential risks. One key consideration is that repayments are tied to a percentage of your revenue, which means your cash flow might be impacted during slower sales periods. This could make it harder to cover other operational expenses if your revenue drops unexpectedly.
Additionally, the total cost of financing may be higher compared to traditional loans, depending on your revenue performance. It’s crucial to carefully review the terms and ensure the repayment structure aligns with your business’s financial health and growth goals.
By fully understanding these factors, you can make an informed decision about whether revenue-based financing is the right fit for your business.
Is revenue-based financing right for my business, and how can I prepare to apply?
Revenue-based financing can be a great fit if you run an eCommerce business operating on platforms like Amazon, Shopify, or others, and generate at least $3,000 in average monthly sales. Your business must also be legally registered in the United States.
To prepare for the application process, ensure you have access to your sales history and be ready to connect your store. The process is quick and straightforward, allowing you to get a pre-qualification offer in just a few minutes. This type of financing is ideal for businesses looking for flexible, sales-based repayment options to support growth without giving up equity.
