Revenue-based financing (also known as royalty financing[1] or royalty-based financing[2]) is a type of financial capital provided to growing businesses in which investors inject capital (sometimes called an advance) into a business in return for a fixed percentage of ongoing gross revenues (called royalties), with payment increases and decreases based on business revenues, typically measured as monthly revenue.[1][3]
It is a non-dilutive form of financing, which means that the company's management retains complete independence and control, as there is no equity investment or impact on the company's shareholding. Usually, the returns to the investor continue until the initial capital amount, plus a multiple (also known as a cap) is repaid.[4] Generally, RBF investors expect the loan to be repaid within 1 to 5 years of the initial investment depending on the model and the funded companies.
- ^ a b "Royalty Financing". Inc.com. 2020-02-06. Retrieved 2024-08-06.
- ^ Hayes, Adam (2022-12-22). "Revenue-Based Financing: Definition, How It Works, and Example". Investopedia. Retrieved 2024-08-06.
- ^ Tetreault, Tricia (2019-02-22). "Revenue-Based Financing: How a Revenue-Based Loan Works". FitSmallBusiness. Archived from the original on 2019-04-26. Retrieved 26 April 2019.
- ^ Rogers, Kate (2016-03-23). "Revenue-Based Financing: What's at Risk". FOXBusiness. Retrieved 9 March 2019.