Revenue-based financing (RBF) is a type of financial capital provided to growing businesses in which investors inject funds in return for a % of ongoing gross revenues.
After an initial grace period, monthly payments continue until the initial capital amount + a multiple (or return cap) is repaid; generally within 3-5 years.
RBF can be thought of as an interim source of finance between bank lending and venture capital. The main differences between these funding types and RBF are:
RBF investors typically do not require collateral and/or personal guarantees
RBF investors do not take long-term ownership (equity) position and do not require an exit to return their investment