Software Growth

Revenue-based financing

Revenue-based financing gives a company upfront capital in return for a fixed percentage of monthly revenue, until a set repayment cap is reached. No equity is sold.

Revenue-based financing (RBF) lets a company with recurring revenue raise money without selling shares. A lender advances cash, and you repay it from a share of monthly revenue until you have paid back an agreed total, called the repayment cap. When revenue is high you pay more; when it dips, you pay less. For a SaaS founder who wants to stay in control, it is a way to fund growth without dilution.

How the cost works

Lighter Capital explains that RBF is priced with a cap multiple rather than an APR. Their example: a $500K advance with a 1.2 cap costs $100K, and $600K is repaid over about three years.

Example: a $100,000 advance at a 1.2 cap means $120,000 total, so $20,000 is the cost. If you pay 5 percent of revenue and your monthly revenue averages $40,000, you pay $2,000 a month and need 60 months. If revenue grows and averages $80,000, payments are $4,000 and you finish in 30 months. Because the cost is fixed, faster repayment means a higher effective annual rate, so compare the true cost to your other options.

What lenders look for

Lighter Capital states its requirements: recurring revenue of at least $15K a month and growing, multiple customers, low churn, gross margin above 50 percent and 12 to 18 months of runway. Other providers differ, so check terms individually. Amounts are tied to your revenue, which caps the size of a raise.

Pros and cons

  • Pros: no equity given up, fast decisions, no valuation negotiation, usually no personal guarantee, and payments flex with revenue.
  • Cons: it needs existing MRR, it is not a fit before revenue, repayment drains cash flow, and the effective cost can be high if you grow quickly.

Where it fits for bootstrappers

RBF suits a SaaS with predictable revenue and a proven acquisition channel, where each dollar spent returns more than the financing costs. It does not suit a product that is still searching for demand. It sits alongside other options for bootstrappers, such as small angel rounds or funds that structure deals around profit sharing. Check your burn rate and margins to confirm you can carry the payments. This is general information, not financial advice.

Sources

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