Revenue Financing Glossary

Money owed to a business by customers for goods or services already delivered. AR represents a liquid asset that can be used as collateral for invoice factoring or working capital advances.

Money a business owes to suppliers and vendors for goods or services received but not yet paid. Stretching AP cycles is a common short-term liquidity tactic, but it strains vendor relationships. RBF working capital is often used to retire overdue AP and restore supplier terms.

The annualized value of a company's recurring subscription or contract revenue. ARR is the primary underwriting metric for SaaS-focused revenue-based financing facilities.

A legal arrangement where a borrower authorizes future revenue proceeds to be directed to a lender as repayment. Common in revenue-based financing and invoice factoring structures.

The window of time during which a borrower can draw funds from an approved credit facility. After this period, undrawn amounts may expire or require renewal.

The average revenue generated per unit sold or per customer contract. ASP is a key metric lenders use to assess revenue sustainability and growth trajectory.

A large lump-sum payment due at the end of a loan term. Revenue-based financing typically avoids balloon payments — repayment occurs as a percentage of ongoing revenue instead.

A sales role focused on outbound prospecting and pipeline generation. In financing contexts, BDRs at capital platforms qualify operators before routing them to underwriters.

A business built and scaled entirely from founder savings and operating revenue — no venture capital, no angel investment, no institutional equity. Bootstrapped founders are the primary users of non-dilutive financing because they have no VC backstop for growth capital.

Short-term financing that bridges a gap until permanent financing or a revenue milestone is reached. Bridge loans are common in construction mobilization, acquisition scenarios, and round-to-round SaaS fundraising gaps.

Net cash burned divided by net new ARR. A burn multiple of 1.0 means you're spending $1 for every $1 of new ARR added. Lower is more capital efficient. Used by lenders to assess sustainability.

The rate at which a company consumes cash reserves each month before reaching profitability. High burn rates increase urgency for non-dilutive capital to extend runway.

In M&A financing, the buy-side represents the acquiring company. Buy-side debt facilities fund acquisition costs without requiring the acquirer to issue new equity.

The total cost to acquire a single new customer, including all sales and marketing expenditures. Lenders use CAC alongside LTV to evaluate the sustainability of a company's growth model.

A ledger tracking ownership percentages, equity dilution events, and shareholder value at each stage of a company's life. Non-dilutive financing preserves the cap table completely.

The annual return generated by an investment relative to the cash invested. Used by investors to evaluate financing structures and compare capital deployment efficiency.

The net movement of money in and out of a business over a period. Positive cash flow is the primary underwriting signal for revenue-based financing — it's more predictive than credit score alone. RBF lenders typically require 3–6 months of bank statements to verify consistent cash flow before approving.

The number of months a business can operate at its current burn rate before depleting cash reserves. RBF and non-dilutive financing are often deployed to extend runway without requiring founders to surrender equity in a bridge round.

An asset — real estate, equipment, inventory, or receivables — pledged to secure a loan. If the borrower defaults, the lender seizes the collateral. Revenue-based financing requires no hard collateral; approval is based on business revenue history. A UCC-1 blanket lien on business assets typically substitutes for physical collateral.

A third-party organization that distributes or sells a company's products or services. Channel partner revenue may qualify as recurring revenue for RBF underwriting purposes.

The percentage of customers who cancel or fail to renew subscriptions within a given period. High churn rates signal revenue instability and directly impact RBF eligibility and cost of capital.

A provision requiring a borrower or investor to return previously distributed funds under specific conditions. Clawbacks protect lenders when revenue figures are subsequently restated.

A fee paid to a lender for holding an approved credit line open, whether drawn or not. Commitment fees are common in revolving credit facilities and growth capital structures.

Revenue lost from existing customers through downgrades or reduced contract scope — not cancellations. Net revenue retention calculations subtract contraction revenue from expansion revenue.

The total cost of securing financing — expressed as an effective APR, factor rate multiple, or annualized percentage. For RBF, cost of capital is calculated by converting the factor rate to an APR based on the expected repayment timeline. Always compare financing options on the same basis before signing.

The risk that the other party in a financial agreement will default or fail to meet their obligations. In RBF, counterparty risk includes the operator's ability to sustain revenue through the repayment period.

A condition in a loan agreement that the borrower must comply with continuously. Violation of a covenant gives the lender the right to accelerate repayment. Revenue-based structures typically have fewer covenants than traditional debt.

A window of time given to a borrower to remedy a covenant breach or default before the lender takes action. Understanding cure periods is critical when reviewing term sheets.

Current assets divided by current liabilities. A current ratio above 1.0 indicates a company can cover its short-term obligations. Lenders use it to assess short-term financial health.

Failure to fulfill the terms of a financing agreement — typically by missing required payments or breaching covenants. Default triggers lender remedies including acceleration of the full balance.

A higher interest rate automatically applied when a borrower enters default. Default interest rates are disclosed in the term sheet and can significantly increase total repayment cost.

Payments received from customers before the associated service or product is delivered. Deferred revenue is a liability on the balance sheet but signals future revenue delivery — relevant for RBF underwriting.

The reduction in existing shareholders' ownership percentage when new equity is issued. Every VC round, SAFE note, or convertible instrument dilutes the founder's cap table stake permanently.

The interest rate used to calculate the present value of future cash flows. In financing, the discount rate reflects the lender's cost of capital and risk assessment of the borrower.

A fund performance metric measuring total capital distributed to investors relative to capital invested. In operator context, DPI frameworks help evaluate the true ROI of non-dilutive versus equity financing.

The time window during which a borrower can draw funds from an approved facility. Funds not drawn within the drawdown period may lapse or require re-approval.

Net operating income divided by total annual debt service obligations. A DSCR of 1.25 means the business generates $1.25 for every $1 of debt payments. Traditional lenders typically require 1.25x or higher. Tariff-compressed margins and rising input costs frequently push DSCR below lender thresholds, blocking bank approval even for otherwise creditworthy businesses.

The average number of days it takes to collect payment after a sale. High DSO indicates slow collections — a key driver of working capital advance demand among contractors and B2B operators.

Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of core operating profitability. Revenue-based lenders often look past EBITDA to raw revenue consistency for underwriting decisions.

Capital structured specifically for purchasing, upgrading, or replacing business equipment. Traditional equipment loans use the equipment as collateral. Revenue-based equipment financing uses business revenue history instead — meaning no lien on the specific machine and faster approval, typically 24–72 hours versus 30–60 days for bank equipment loans.

A specific condition defined in a loan agreement that allows the lender to demand immediate full repayment. Events of default typically include missed payments, covenant breaches, and insolvency events.

A decimal multiplier applied to a cash advance that determines total repayment. A factor rate of 1.35 on a $50,000 advance means total repayment of $67,500, regardless of how long repayment takes. Unlike APR, factor rates are fixed at origination and do not decrease as the balance is paid down.

A legal claim on a borrower's assets that takes precedence over all other creditors in the event of default or liquidation. Most revenue-based lenders file a first-priority UCC-1 lien against business assets.

A temporary agreement by a lender to delay or reduce repayment obligations, typically granted when a borrower experiences documented financial hardship. Not available from all lenders.

The percentage of leads or prospects that progress through each stage of the sales process to close. Lenders evaluate funnel conversion rates when assessing pipeline-backed revenue projections.

Revenue minus cost of goods sold (COGS), expressed as a percentage of revenue. High gross margins indicate capital efficiency. SaaS lenders typically require 60%+ gross margins for revenue-based facilities.

The fixed percentage of daily or monthly gross revenue automatically withheld by an RBF or MCA provider to apply toward repayment. A 12% holdback on $100,000 in monthly revenue means $12,000 per month toward repayment. Holdback percentages are negotiated at origination and remain fixed regardless of revenue fluctuations.

The minimum acceptable rate of return on an investment or lending decision. Lenders set hurdle rates to ensure financing fees justify the deployment risk.

A contractual obligation to compensate another party for losses or damages they incur. Common in financing agreements to protect lenders from borrower misrepresentation.

The discount rate that makes the net present value of all cash flows equal to zero. Used by lenders and investors to evaluate the profitability of financing structures.

The number of times a business sells and replaces its full inventory within a given period. A key RBF underwriting metric for product-based businesses — high turnover signals strong demand and revenue predictability. Calculated as Cost of Goods Sold ÷ Average Inventory.

Total value returned divided by total capital invested. An investment multiple of 1.5x means for every $1 deployed, $1.50 was returned. Revenue-based financing typically carries a 1.1x–1.5x repayment multiple.

Selling outstanding invoices to a third party at a discount in exchange for immediate cash. A common working capital solution for contractors and B2B businesses with long payment cycles.

The process of identifying and attracting potential customers or clients. In the financing industry, lead generation platforms like Rev Boost Funding connect operators to capital partners without directly issuing loans.

A legal right or claim against business assets used as security for a debt. Revenue-based lenders typically file UCC-1 liens against all business assets rather than requiring specific collateral.

A revolving credit facility allowing a business to draw funds up to a preset limit, repay, and draw again as needed. Unlike RBF (which provides a one-time advance), a line of credit charges interest only on the drawn balance. Banks typically require strong credit and collateral; fintech lines of credit underwrite on cash flow similar to RBF.

An exit transaction that converts ownership stakes into cash — typically an acquisition, IPO, or secondary share sale. Non-dilutive financing (RBF, working capital advances) allows founders to scale toward a higher-value liquidity event without pre-exit equity dilution compressing the final payout.

The total net revenue expected from a customer over the entire relationship. High LTV relative to CAC signals a sustainable business model that qualifies for larger RBF facilities.

Net new ARR divided by prior-quarter S&M spend. A magic number above 0.75 indicates efficient go-to-market spending. Lenders use it to evaluate SaaS capital efficiency.

A prospect who has engaged with marketing content and meets criteria suggesting they are more likely to become a customer. In SaaS financing context, MQL volume signals pipeline health.

The date on which a loan's full outstanding principal and interest must be repaid. Revenue-based loans don't always have fixed maturity dates — repayment ties to revenue until the cap is reached.

An advance against future credit card receipts or bank deposits, repaid as a daily or weekly percentage of revenue. MCAs are non-dilutive and approval-fast — ideal for variable-revenue businesses.

A lump-sum advance repaid as a percentage of future daily or weekly revenue. Not technically a loan — it is a purchase of future receivables. Factor rates typically range from 1.1 to 1.5.

A hybrid debt/equity structure that sits between senior debt and equity in a company's capital stack. Mezzanine lenders may receive warrants or conversion rights — making it a semi-dilutive instrument.

Total value returned divided by total capital invested. An MOIC of 1.4 means $1.40 returned for every $1 invested. Used to compare cost of capital across financing structures.

Predictable monthly income from active subscription or service contracts. MRR is the core underwriting metric for SaaS revenue-based financing. Lenders advance 1–3x MRR as a standard facility size.

A loan provision prohibiting the borrower from taking specific actions — such as taking on additional debt, selling assets, or changing business ownership — without lender approval.

A commitment by a borrower not to encumber specific assets with new liens. Protects the existing lender's security position in the borrower's assets.

Capital that does not require issuing equity or surrendering ownership. Revenue-based loans, MCAs, working capital advances, and growth capital loans are all non-dilutive instruments.

A legal commitment making the business owner personally liable for repaying a business debt using personal assets. Most revenue-based financing structures do not require a personal guarantee.

A fee charged when a borrower repays a loan earlier than the contracted schedule. Always check the prepayment terms before signing — some RBF structures allow early repayment at a discount to the full multiple.

A financing structure where repayment is tied to business profits rather than gross revenue. Less common than revenue-based loans — profit variability increases lender risk.

A signed legal document committing a borrower to repay a specific amount under defined terms. Promissory notes are the foundational legal instrument in most business financing transactions.

New MRR plus expansion MRR divided by churned MRR plus contraction MRR. A quick ratio above 4.0 indicates strong revenue growth relative to losses. Lenders use it to evaluate SaaS growth quality.

A non-dilutive financing structure where capital is repaid as a percentage of monthly revenue until a fixed multiple is reached. No equity surrendered. No personal guarantee typically required.

Revenue streams that maintain stability during economic downturns. Lenders evaluate recession resistance when underwriting RBF facilities — essential services and subscription businesses score highest.

The maximum total amount a borrower repays under a revenue-based financing agreement. Expressed as a multiple of the advance amount — a 1.35x cap on a $100,000 advance means total repayment of $135,000. When the cap is reached, all repayment obligations end regardless of remaining term. Always confirm a fixed repayment cap before signing any RBF agreement.

A loan condition requiring the borrower to submit regular financial reports — monthly bank statements, revenue reports, or audited financials — to the lender throughout the term.

The contract governing a revenue-based financing facility. Key terms include: advance amount, repayment percentage, repayment cap, prepayment provisions, and default conditions.

A financing structure where repayment is calculated as a percentage of revenue, similar to a royalty. Common in media, IP licensing, and natural resource businesses with variable revenue cycles.

The fixed percentage of monthly gross revenue applied to repay a revenue-based advance. Typical range: 5%–15%. Negotiated at origination based on advance size, revenue consistency, and operator risk profile.

A contractual right giving the holder the option to match any offer before an asset is sold or a deal is executed with a third party. Common in financing agreements to protect lender position.

A heuristic suggesting that revenue-based financing is optimally structured when annual repayment is approximately 10% of the borrower's annual revenue. Keeps repayment sustainable without straining cash flow.

The principle that a SaaS company's revenue growth rate plus profit margin should exceed 40%. Companies meeting this benchmark are typically strong candidates for larger revenue-based facilities.

The number of months a company can continue operating at its current burn rate before exhausting cash reserves. Revenue-based financing extends runway without equity dilution.

Growth rate + profit margin ≥ 40%. The widely-used benchmark for SaaS business health. Companies above 40 typically access the best RBF terms — lower multiples and larger advance sizes.

An outbound sales role focused on lead qualification and pipeline generation. SDR teams are commonly funded through revenue-based financing at SaaS companies scaling go-to-market without dilution.

A prospect evaluated by the sales team and deemed ready for direct sales engagement. SQL velocity signals revenue growth trajectory relevant to RBF underwriting.

The rate at which a company converts pipeline into closed revenue. Calculated as: (number of opportunities × deal value × win rate) ÷ sales cycle length. High velocity signals strong near-term revenue.

A Small Business Administration guaranteed loan issued through a participating bank. SBA loans offer low interest rates (typically prime + 2–3%) but require 60–120 days to process, strong personal credit (680+), often a personal guarantee, and sometimes a real estate lien. Revenue-based financing is the fastest alternative when SBA timelines don't fit the need.

A constraint that limits a company's ability to grow revenue proportionally. Identifying bottlenecks helps operators determine where capital deployment will have maximum impact.

Using RBF capital specifically to fund a sales development team. A common use case for SaaS companies scaling pipeline without issuing equity to investors.

The IRS rule requiring R&D expenditures to be amortized over 5 years (domestic) or 15 years (foreign) instead of being immediately expensed. Enacted via the Tax Cuts and Jobs Act, Section 174 created sudden tax liabilities for software companies and startups. RBF bridge loans are commonly used to cover the resulting cash flow gap.

A legal document granting a lender a security interest in a borrower's assets. Revenue-based lenders typically secure against all business assets via a UCC-1 filing.

The first institutional equity funding round, typically $500k–$5M. Founders considering seed rounds should evaluate non-dilutive alternatives — especially if strong recurring revenue already exists.

The order in which creditors are repaid in the event of default or liquidation. Senior lenders are paid first. Always understand where your RBF lender sits in the capital stack.

The first significant institutional venture capital round, typically ranging from $2M to $15M. Series A investors receive preferred equity and often board representation. Non-dilutive financing (RBF, working capital advances) is used to reach Series A metrics without selling equity at pre-traction valuations.

A supplementary agreement modifying or adding to the terms of a main financing document. Side letters may grant specific rights not available to all parties in a standard agreement.

The legal right of a party who pays a debt on behalf of another to assume the creditor's rights against that party. Relevant in guaranty and insurance structures connected to financing agreements.

A fee paid to an advisor or broker upon successful completion of a financing transaction. Success fees are common in larger growth capital deals and M&A transactions.

A financial instrument that replicates the economic exposure of equity without issuing actual shares. Some mezzanine lenders use synthetic equity structures to participate in upside without formal cap table dilution.

A non-binding document outlining the key financial and legal terms of a proposed financing. Always review: advance amount, repayment cap, repayment percentage, prepayment provisions, and default triggers.

A portion of a larger financing facility released in stages based on milestones or time periods. Tranche structures let operators draw capital as needed rather than accepting — and paying for — a full advance at once.

A fund performance metric measuring total value (distributions + unrealized value) relative to invested capital. In operator contexts, TVPI frameworks help compare true returns across financing structures.

A financing statement filed by a lender with the state government to publicly declare a security interest in a borrower's assets. A UCC-1 does not require specific collateral — it covers all business assets. Standard in RBF and MCA structures.

An RBF structure with no maximum repayment cap — repayment continues as a revenue percentage indefinitely or until the lender terminates. Rare and unfavorable. Always confirm a fixed repayment cap in your term sheet.

Revenue generated by upgrading or expanding existing customer contracts. Strong upsell rates drive net revenue retention above 100%, which directly improves RBF eligibility and terms.

Debt financing for venture-backed companies, typically structured with warrants that give lenders equity participation. Unlike pure RBF, venture debt carries dilutive warrant coverage — usually 0.5%–2% of the advance amount.

The average rate a company pays for all its financing, weighted by proportion of debt and equity. Non-dilutive financing lowers WACC by avoiding the high implicit cost of equity.

A contractual right giving a lender or investor the option to purchase equity at a fixed price within a defined period. Common in venture debt structures — making venture debt semi-dilutive compared to pure RBF. Revenue-based financing does not involve warrants; all equity remains with the founder.

A sales pipeline value adjusted by the probability of closing each deal. Lenders use weighted pipeline projections to evaluate near-term revenue growth when considering larger advance sizes.

Financing products offered by one company but branded under another company's identity. Some lead generation platforms white-label third-party capital products to operators under their own brand.

The difference between current assets and current liabilities — the operating liquidity available to a business. Working capital advances provide immediate liquidity when this gap creates an operational shortfall.