Revenue-based financing

Revenue-based financing for retail: inventory before the peak, repaid from it.

Independent retailers buy months before they sell. A revenue-based advance funds the buy and is repaid as the stock sells through.

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How do retailers use revenue-based financing?

Short answer: Independent retailers commit to inventory early: holiday stock is ordered in summer and spring lines in winter, often with deposits or payment on delivery. A revenue-based advance taken before the buy is repaid as a share of sales, so most of it is repaid in the store's best months rather than its tightest ones.

Key facts

Inventory is bought months before peak
Payment follows sales
Peak months repay most of the advance
Base the order on last year's sell-through

The retail buying cycle

Independent retailers commit to inventory early. Fall and holiday stock is ordered in the summer; spring lines are ordered in winter. Suppliers often want deposits or payment on delivery. The cash leaves long before customers walk in, and the store's best months come after its tightest ones.

A revenue-based advance taken before the buy is repaid as a share of the sales that inventory produces. The payment rises in December and falls in January, which matches what a retail account can actually carry.

What a reviewer reads

Card and debit settlements and cash deposits through the year.
Inventory purchases and supplier payments.
Gross margin by category, if you can summarize it.
Rent and staffing as a share of revenue.
Holiday performance in the last year or two.

Avoiding the inventory trap

The risk in retail is buying stock that does not sell. Size the advance to the lines that sold through last year, keep a reserve for markdowns, and avoid using short-term capital to fund slow-moving categories. A funder sees the same risk, so a clear purchase plan improves the file.

Other good uses

Store refits timed for quiet months.
A point-of-sale or ecommerce upgrade.
Opening a seasonal pop-up or second location with a tested concept.

A worked example

Illustrative arithmetic: a gift and home store with $60,000 average monthly sales

Advance: $30,000. Repayment cap: $30,000 × 1.22 = $36,600.
Cost of the capital: $6,600, fixed in dollars from the start.
Payment: 9% of monthly revenue. At $60,000 a month that is $5,400, so about 6.8 months to reach the cap.

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

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 for retail stores 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.

Sources and review

Statistics Canada: Subjects (business and industry data)

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

Common questions

Does cash revenue count?

Cash deposited to the business account counts. Cash that never reaches the bank cannot be read.

Is a seasonal store harder to fund?

Not if the pattern repeats. The review reads twelve months to see the full season.

Can I fund holiday inventory?

Yes. It is one of the most common uses, ideally taken before the purchase order is due.