Glossary
Recurring revenue measured over a year.
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Short answer: Annual recurring revenue (ARR) is recurring revenue measured over a year, usually monthly recurring revenue times twelve or the annual value of active contracts. A business with $30,000 in MRR has $360,000 in ARR. Funders check that bank deposits actually support the ARR figure claimed.
Key facts
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Recurring revenue measured over a year.
ARR is usually MRR times twelve, or the annual value of contracts.
It shows scale.
$30,000 MRR is $360,000 ARR.
Common in software and subscription businesses.
Reviewers check that deposits support ARR claims.
ARR is a projection of current contracts, not guaranteed future revenue.
Glossary terms are most useful next to the decisions they affect. If you are comparing offers, read the pages on factor rates, payback amounts and the repayment cap together. If you are preparing an application, the documents checklist and requirements pages explain what is read. And if a term in an agreement is unclear, ask the funder to explain it in writing before you sign; a good funder will.
ARR is a snapshot of the current run-rate. Two companies with the same ARR can be very different if one has long contracts and low churn and the other has month-to-month customers who leave often.
ARR is reported in investor updates, board decks and pitch materials. It rarely appears on financial statements, which use recognized revenue instead. When annual contracts are prepaid, cash arrives up front while revenue is recognized monthly, which is why ARR, revenue and deposits can differ.
Most funding terms come back to two questions: how much will I repay in total, and how will each payment affect my cash in a normal month and a slow one. When you meet an unfamiliar term in an offer or agreement, translate it into those two answers before deciding whether it matters. If a funder cannot explain a term in plain language and with your own numbers, treat that as useful information about the offer.
These terms often appear alongside annual recurring revenue (arr) in offers, agreements and conversations with funders:
Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.
Not exactly; it is a run-rate.
See the related guides and the comparison pages, or apply and ask.
No. It is educational information, and agreements vary.
Educational information only. It is not legal, tax or accounting advice.
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