Revenue based funding: how it works for a small business
Updated September 9, 2026
Revenue based funding is often discussed alongside merchant cash advances and sales-based financing. The name, legal treatment, required disclosure and collection rules can vary by product and state, so read the agreement—not just the headline amount—and ask how the obligation will be collected.
Short answer
Revenue based funding can give a business capital in exchange for a purchased share of future receivables. The contract may set a total remittance and a collection schedule; it is not necessarily a conventional term loan. Whether a transaction is treated as a loan or a receivables purchase depends on the signed agreement, the facts and applicable law. The total cost and payment burden should be clear before accepting an offer.
What is being funded?
A provider advances capital today and purchases an agreed amount of future business receivables. In a fixed-remittance structure, the business sends a scheduled ACH amount. In a percentage-based structure, the provider collects an agreed share of eligible sales or deposits. The contract should explain which structure applies, how collections are calculated and when the purchased amount is considered satisfied.
This structure is different from a conventional loan with principal and interest. The signed agreement and applicable state law determine how a transaction is characterized. Foretrust Funding is not a bank, and the product described here is intended to be a purchase of future receivables. Products, amounts, terms, disclosures and availability depend on underwriting and state requirements.
When can it make sense?
The product can be useful when a business has repeatable revenue, needs working capital quickly and can connect the capital to a measurable business use such as inventory, payroll timing, a vehicle repair or a signed contract. The use of proceeds matters: fast capital is only helpful when the expected business return is greater than the total remittance and the business can carry collections during a slower month.
It is usually a poor fit for covering a recurring operating loss, replacing a lender payment without a plan, or stacking several daily or weekly obligations. A slower business may need a smaller amount, a longer amortization, a bank product, or no new financing at all.
What should you compare?
- The amount received versus the total amount to be remitted—not just the factor rate or payment.
- The collection frequency, estimated duration and what happens if deposits are lower than expected.
- Origination, underwriting, wire, renewal, late, default, broker and other contract fees.
- Whether there is a reconciliation process for a genuine drop in eligible sales and how to request it.
- Existing obligations, personal guarantees, liens, confession-of-judgment language and restrictions on other financing.
A simple example
If a business receives $50,000 and the agreed factor is 1.30, the total remittance is $65,000 before any separately disclosed fees. If the schedule is 26 weekly payments, the scheduled payment would be $2,500. That example is not a quote: the real payment, duration, fees and contract terms depend on the offer and the business.
Sources and further reading
- U.S. Small Business Administration — Fund your business — Overview of common ways small businesses fund operations and growth.
- Federal Reserve Banks — Small Business Credit Survey — Current research on how small businesses seek and use credit.