- KredX Editorial Team
- 07 Oct 21
- Revenue Based Financing

Entrepreneurs and founders around the globe are increasingly embracing the non-dilutive capital model of revenue-based financing recently. In fact, during the first 6 months of FY21, investors around the world poured in more than 500 million USD into revenue-based financing companies. Though this new-age funding option is still in its early days in India, it is high time the country leverages it fully.
So, here’s a primer on how it works.
What Is Revenue-Based Financing?
Revenue-based financing meaning, or RBF, is simple – it is a model for a business to raise funds premised on its past and estimated revenue. It is also known as cash flow-based lending. Under this model, an enterprise pledges a proportion of its annual revenue in order to acquire growth capital. Although this funding model is suitable for all types of companies, it works best for smaller firms as their required quantum of funds may not be significant, and venture capitalists will not entertain their pitches. So, SMEs and early-stage ventures turn to revenue-based funding instead. Moreover, it allows them to avail funds without any equity dilution or collateral.How Does It Work?
In India, there are several companies engaged in revenue-based financing. To begin with, a company specialising in RBF assesses several parameters of a potential borrower before sanctioning a portion of the estimated revenue as advance. Some of these parameters are as below:- Cash Flows
- Revenues
- Scalability
- Operating Margins
- Growth Potential
Why Should Businesses Choose Revenue-Based Financing?
Businesses in India can opt for RBF due to its numerous benefits, such as the ones highlighted below:- Cheaper Than Equity
- No Need Of Personal Guarantees
- Retention Of Ownership And Control
- Fast Funding Timeline
- No Large Payments
- Shared Efforts Towards Growth
- Financing Optionality