What is revenue-based financing?

By the Sullivan Financing team Updated June 2026 6 min read

Revenue-based financing is business capital that is sized, priced, and repaid according to your revenue rather than your credit score or collateral. You receive a lump sum; you repay a fixed total through regular payments scaled to what your business actually brings in.

How it works, mechanically

Underwriting is your bank activity. The funder reviews recent bank statements — deposits, true operating revenue, balances, existing obligations — and offers an amount your cash flow can carry, typically 70–120% of one month's revenue.
Pricing is a factor rate. An offer of $50,000 at a 1.32 factor means $66,000 total payback. The cost is fixed at signing; it doesn't compound.
Repayment is automatic. Fixed daily or weekly ACH payments over a set term (commonly 4–12 months), drawn from the same operating account that was underwritten.

Who it actually fits

Established businesses with real revenue — usually $20K+/month in deposits and six or more months of history
Time-sensitive uses of funds — inventory buys, equipment failures, payroll bridges, contract ramp-ups — where speed is worth more than the cheapest possible rate
Owners whose credit file under-represents the business — the product looks at what the business does, not what a score says

It is the wrong product for long-payback projects (real estate, multi-year build-outs) and for plugging losses with no turnaround plan. Fast money on a shrinking business only accelerates the shrink.

What it costs — honestly

Factor rates commonly run 1.2 to 1.5 depending on the strength of the file and the term length. Translated to annualized terms, that's expensive next to a bank loan — and the comparison misses the point in both directions. The bank loan takes weeks and a credit bar most owner-operators can't clear; the advance funds in a day against revenue you can prove. The only honest test: will the money earn more than it costs during the term? If yes, it's a tool. If no, don't take it — from us or anyone.

Red flags: how to spot a bad funder

Teaser offers — a big number on the phone that shrinks at contract time. A real offer is in writing, computed from your statements.
Pressure to stack — any funder encouraging you to take their advance on top of two others is selling you a default.
Opaque payoff terms — you should know the exact total payback, the payment, and the early-payoff treatment before signing.
Junk fees — large "origination," "platform," or "ACH program" fees deducted from your wire that weren't in the offer.
Confession of judgment clauses — increasingly restricted, still worth refusing where you see them.

Our approach: the offer that lands in your email is computed from your three statements, shows the exact amount, total payback, and payment for each term option, and doesn't change at signing. No hard credit pull to see it. Check your offer →

Questions to ask any funder (including us)

What is the total payback amount, in dollars?
What is the payment, and how often is it drawn?
What happens if I pay off early?
Are there any fees not included in the payback figure?
What happens in a slow month?