Revenue-based financing

Revenue-based financing in your books: what to ask your accountant.

Recording an advance correctly keeps your statements clean and avoids surprises at year-end. This is general information; your accountant decides the treatment.

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How is revenue-based financing recorded in the books?

Short answer: It is commonly recorded as a liability when the funds arrive, with each revenue-share payment reducing the balance and the cost, the cap minus the amount received, recognized as a financing expense over the expected repayment period. Treatment depends on the agreement and your circumstances, so confirm with your accountant.

Key facts

Usually a liability, not revenue
Payments reduce the liability
The cost is spread as a financing expense
Bring the agreement to your accountant

General information, not advice

Accounting and tax treatment depends on the agreement and your circumstances. The points below describe common questions Canadian owners raise. Bring the agreement to your accountant and ask how it should be recorded before your next financial statements or tax filing.

How it is often recorded

When funds arrive, the advance is typically recorded as a liability rather than revenue.
Payments reduce the liability, with the portion representing the cost of the capital recorded as a financing expense over time.
Any fee deducted at funding is usually recorded separately from the advance.
Bookkeeping software may need a separate liability account for each advance.

Questions to ask your accountant

Is the cost of this financing deductible, and over what period?
How should the agreement be classified, given its legal structure?
Does it affect any covenant calculations with my bank?
How should it appear on my year-end financial statements?
Is there any GST/HST implication for fees on this agreement?

Keeping clean records

Keep the signed agreement, the funding confirmation, monthly payment records and the payoff letter. Clean records make year-end easier, help with any future financing application and make reconciliation requests straightforward if your revenue drops.

Where Canadian files usually start

Monthly revenueTypically from around $20,000 a month in deposits for Canadian files. The exact line varies by funder and by file.

Time in businessTypically about 12 months. Newer businesses can be reviewed, but the options narrow.

Account healthLimited low-balance or negative days. Funders read the last few months of bank statements for this.

CreditScores from 500 are considered. A score of 600 or higher opens more options and better offers.

DocumentsA signed application and recent business bank statements, typically the last four months.

Existing advancesFiles with an existing advance can be reviewed, including second position.

Next step: apply once with a signed application and your last four months of business bank statements. The file is read for rBF in your books and matched to the structure that fits, whether that is revenue-based financing, a merchant cash advance or a smaller first advance that builds history. Questions first? Call (305) 384-8391.

What should you ask your accountant?

Ask how the advance and its cost should appear on your financial statements, whether the cost is deductible and when, how fees deducted at funding should be treated and what records to keep. General information is no substitute for advice on your own agreement.

Sources and review

Canada Revenue Agency: Keeping records

Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.

Common questions

Is the advance taxable income?

Generally it is recorded as a liability, not revenue. Confirm the treatment with your accountant.

Is the cost deductible?

Financing costs are often deductible for businesses, but confirm the treatment and timing with your accountant.

Do I need a separate account?

A separate liability account in your books for each advance keeps things clear.