Revenue-based financing

Revenue-based financing vs venture debt: two growth tools for different stages.

Both avoid a priced equity round. They are built for different companies. Here is how to tell which one fits.

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Should a growth company choose revenue-based financing or venture debt?

Short answer: Venture debt is a loan to venture-backed companies, underwritten largely on their investors and runway, with interest, covenants and often warrants. Revenue-based financing is underwritten on revenue, costs a fixed cap and involves no equity or warrants. Revenue-generating companies without venture backing usually fit revenue-based financing.

Key facts

Venture debt: investors and runway
RBF: revenue history
Venture debt often adds warrants and covenants
RBF suits companies without VC backing

What each is

Venture debt is a loan offered to venture-backed companies, usually alongside or shortly after an equity round. It typically carries interest, sometimes warrants that give the lender a small right to buy equity, and covenants that restrict how the company operates. It is underwritten largely on the strength of the company's investors and cash runway.

Revenue-based financing is offered to businesses with steady revenue, venture-backed or not. It is repaid as a share of revenue up to a fixed cap. It is underwritten on the revenue itself.

Side by side

	Revenue-based financing	Venture debt
Who it suits	Revenue-generating businesses of many kinds	Venture-backed start-ups
Underwritten on	Revenue and account health	Investors, runway and growth
Cost structure	Fixed cap via a multiple	Interest, fees and often warrants
Equity component	None	Warrants are common
Payment	Share of revenue	Fixed schedule, sometimes interest-only first
Covenants	Usually light	Often meaningful
Typical speed	Days	Weeks to months

Choosing

If you have no institutional investors but steady revenue, revenue-based financing is the realistic option.
If you have just raised a round and want to extend runway with a larger amount, venture debt may be cheaper.
If revenue is volatile, the flexible payment of revenue-based financing reduces risk.
If you want to avoid warrants and covenants, revenue-based financing is simpler.

Using both

Some companies use revenue-based financing for short, measurable needs such as marketing or inventory, and venture debt for longer-term runway. If you combine them, check that the venture debt covenants permit the revenue-based agreement.

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 vs venture debt 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

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

Common questions

Is venture debt cheaper?

Its headline rate can be lower, but include fees and warrants. For non-venture-backed companies it is usually not available.

Do I need investors for revenue-based financing?

No. It is based on revenue.

What are warrants?

Rights for a lender to buy a small amount of equity at a set price, which adds to the cost.