For many start-ups, raising capital often means giving up ownership or control. But an emerging option, Revenue-Based Financing (RBF), is changing the landscape. It allows founders to secure funding tied to their revenues — not equity — making it a flexible, founder-friendly alternative.
What Is Revenue-Based Financing?
A funding model where investors provide capital in exchange for a fixed percentage of the company’s ongoing revenues.
Repayments continue until a predetermined amount (principal + agreed multiple) is paid back.
Unlike traditional loans, there’s no fixed EMI; unlike equity, there’s no dilution.
How It Works for Startups
Startup applies to an RBF platform/investor with revenue data.
Funding amount is sanctioned (often a few lakhs to a few crores).
Startup repays a fixed % of monthly revenues (say 5–10%) until the agreed cap is reached.
Benefits of RBF
No Equity Dilution: Founders retain full ownership.
Flexible Repayments: Payments rise and fall with revenue.
Quick Access: Approval often in days, based on revenue data, not collateral.
No Personal Guarantees: Unlike bank loans, founders’ personal assets usually not required.
Risks & Considerations
Total repayment cost can be higher than a bank loan.
Works best for predictable revenue streams (SaaS, D2C, subscription-based).
Not suitable for pre-revenue or very early-stage startups.
RBF in India
Growing number of players: Klub, Velocity, GetVantage, Recur Club.
Popular among D2C brands, SaaS startups, and creators.
Regulatory environment is evolving but supportive.
Comparison With Other Funding Options
| Feature | RBF | Bank Loan | Equity Funding |
|---|---|---|---|
| Ownership Dilution | No | No | Yes |
| Collateral Required | Usually No | Often Yes | No |
| Repayment Flexibility | Yes (Revenue-Based) | Fixed EMIs | Not Applicable |
Conclusion
Revenue-Based Financing is giving startups a new middle path — fast capital without losing equity. With India’s booming digital and D2C economy, RBF is poised to become a mainstream funding tool.
FAQ Section
Q1. What types of startups can use RBF?
SaaS, D2C, e-commerce, subscription-based businesses — basically those with recurring revenues.
Q2. How is RBF different from a loan?
Repayment is a % of revenue, not a fixed EMI. No collateral or personal guarantees required.
Q3. Does RBF affect ownership?
No, founders retain 100% equity.
Q4. What’s the cost of RBF capital?
Investors charge a fixed fee or revenue multiple (e.g., repay 1.3x the amount borrowed).
Q5. Is RBF available in India?
Yes — platforms like Klub, Velocity, GetVantage, and Recur Club offer RBF to Indian startups.
Published on : 17th September
Published by : SMITA
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