Revenue-based financing — also called a merchant cash advance (MCA) — is one of the fastest and most accessible ways for a small business to access capital. Repayment is tied to your daily revenue rather than a fixed monthly payment, making it a flexible option when cash flow is unpredictable.
What Is Revenue-Based Financing?
Revenue-based financing provides a lump sum of capital in exchange for a percentage of your future daily or weekly sales. A small percentage is deducted each business day from your bank account automatically. When sales are strong, you pay more. When sales slow, payments decrease. The advance is fully repaid when the agreed-upon total amount is collected.
It's not a traditional loan — there's no interest rate in the conventional sense, no fixed monthly payment, and no set payoff date. The payback timeline depends entirely on how much revenue your business generates.
How Factor Rates Work
Instead of an interest rate, revenue-based financing uses a factor rate — a multiplier applied to the amount you receive to determine the total amount you repay.
| Advance Amount | Factor Rate | Total Payback | Cost of Capital |
|---|---|---|---|
| $50,000 | 1.15 | $57,500 | $7,500 |
| $50,000 | 1.30 | $65,000 | $15,000 |
| $50,000 | 1.49 | $74,500 | $24,500 |
FundCapa's lender network offers factor rates typically ranging from 1.10 to 1.49, depending on your business profile, industry, monthly revenue, and time in business. Stronger businesses qualify for lower factor rates.
Factor rate vs. APR: Factor rates look lower than APRs but measure differently. A 1.30 factor rate on a 6-month repayment period converts to a much higher APR than a 1.30 factor rate paid over 18 months. The shorter the payback period, the higher the effective cost.
How the Daily Retrieval Rate Works
Once funded, a fixed percentage of your daily bank deposits — called the retrieval rate or holdback — is deducted each business day. Retrieval rates typically range from 10% to 20% of daily deposits.
Example: $100,000 advance at a 15% retrieval rate with $8,000 in daily deposits = $1,200 deducted daily. At that pace, the advance would be repaid in approximately 62 business days (~3 months).
Who Qualifies for Revenue-Based Financing?
- Time in business: 6+ months minimum
- Monthly revenue: $10,000+ in average bank deposits
- Credit score: 500+ (revenue is weighted more heavily than credit)
- Bank account: Active U.S. business checking account
- Industry: Most industries qualify — food service, retail, healthcare, construction, and more
Pros and Cons of Revenue-Based Financing
| Pros | Cons |
|---|---|
| Fast approval — often same day | Higher cost than bank loans |
| No collateral required | Daily deductions can strain cash flow |
| Flexible repayment tied to revenue | Factor rates don't translate to APR easily |
| 500+ credit score accepted | Not ideal for businesses with thin margins |
| No fixed monthly payment | Stacking multiple advances creates risk |
| Funds in 1–2 business days | Cannot be "paid off early" for savings |
When Revenue-Based Financing Makes Sense
This product is best suited for:
- Businesses that need capital fast (within 1–3 days)
- Owners who don't qualify for bank loans due to credit or time in business
- Businesses with seasonal or variable revenue who can't commit to fixed monthly payments
- Short-term opportunities: inventory purchases, equipment repairs, payroll gaps, marketing campaigns
When to Consider Other Options
Revenue-based financing is not ideal if:
- You need funds for 3+ years (a term loan or SBA loan is cheaper long-term)
- Your daily margins are thin and daily deductions would cause cash flow problems
- You already have an active MCA — stacking advances significantly raises risk
See How Much You Qualify For
One-page application, soft pull only, decision in under 1 hour. FundCapa matches your business to the best lender and factor rate for your profile.
Get Your Offer →Frequently Asked Questions
Is a merchant cash advance a loan?
Technically no. An MCA is a purchase of future receivables, not a loan. This is why they're not subject to usury laws in most states. However, they function similarly to a loan for practical purposes.
Can I pay it off early?
You can, but unlike a loan, you typically don't save money by paying early — the total payback amount is fixed by the factor rate regardless of how fast it's repaid.
What happens if revenue drops?
Payments automatically decrease because the retrieval rate is a percentage of actual deposits. This is one of the key advantages over fixed-payment loans.