For many startups, giving up equity or taking on risky debt aren’t always the best options. That’s where Revenue-Based Financing (RBF) comes in: a funding model that lets you raise money without giving up ownership and without the burden of fixed EMIs.
What Is Revenue-Based Financing?
Revenue-Based Financing (RBF) is a funding method where a startup raises capital and repays it as a percentage of monthly revenue, until a pre-agreed total amount is paid back.
It’s not equity. It’s not a traditional loan. It’s something in between that is fast, flexible, and aligned with your revenue cycle.
How It Works
- You raise, say, ₹50 lakh from an RBF provider.
- You agree to repay ₹65 lakh (principal + fee) over time.
- Each month, you repay a fixed percentage of revenue (usually 5–15%)
- If your revenue is low, your repayment is low. If it grows, repayment speeds up.
There are no fixed EMIs, no equity dilution, and no need for collateral.
Key Terms to Know
| Term | Meaning |
|---|---|
| Principal | The amount you receive upfront |
| Repayment Cap | Total amount to repay (e.g., 1.3x or 1.5x the principal) |
| Revenue Share % | % of monthly revenue you’ll share with the lender |
| Timeframe | Target window to fully repay (generally 6–18 months) |
| Use of Funds | Usually unrestricted (marketing, inventory, working capital, etc.) |
RBF in the Indian Context
- RBF is gaining traction in India, especially with D2C, SaaS, and digital-first businesses.
- Platforms like Klub, Velocity, GetVantage, and Recur Club are leading providers.
- It suits Indian startups that have:
- Predictable revenue
- High-margin products
- Limited access to equity or VC money
When Is Revenue-Based Financing Ideal?
Great Fit For:
- Bootstrapped founders who want to retain control
- D2C and e-commerce brands scaling via ads/inventory
- SaaS businesses with MRR but not high margins
- Startups that are not yet VC-backable but have stable income
- Companies raising bridge capital between rounds
Less Ideal For:
- Pre-revenue or R&D-heavy startups
- Businesses with unpredictable or seasonal revenue
- Companies looking for long-term capital (RBF is short-medium term)
Benefits of Revenue-Based Financing
- No equity dilution
- Flexible repayments based on actual income
- Faster approval and disbursement than banks or VCs
- Founder-friendly with no board seats or personal guarantees
- Works well with repeatable, scalable growth models
Things to Watch Out For
- Total repayment cap can feel expensive if revenue grows fast because repaying the same pre-agreed amount sooner leads to a higher implied interest rate or cost of capital.
- Monthly repayments can eat into cash flow if margins are thin
- Not a fit for startups with high burn or long cash cycles
- Multiple RBF rounds can create overlapping obligations
Final Thought
Revenue-based financing is like training wheels for capital, it helps you accelerate without losing ownership.
As more Indian founders build capital-efficient, revenue-first businesses, RBF offers a new path: one that doesn’t require giving up equity or control.
It’s not for everyone. But for many modern startups, it’s the just-right fuel to go faster, smarter.