Revenue based funding: how it works for a small business

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 is different from a loan with principal and interest. Foretrust Funding is not a bank, and its revenue based funding is a purchase of future receivables, not a loan. Products, amounts, terms 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.