RBF Due Diligence Checklist: 12 Items Before You Sign a Revenue-Based Loan

The 12-Item Pre-Signature Checklist

Print this list. Work through it systematically before signing any revenue-based loan agreement.

• 1. Total repayment amount stated in writing. Not a range — an exact dollar figure.
• 2. Cost multiple calculated and confirmed. Divide total repayment by advance received.
• 3. Holdback percentage documented. Confirm it's a fixed percentage of revenue, not a fixed dollar amount.
• 4. Origination and admin fees itemized. All fees included in the cost multiple calculation.
• 5. UCC-1 lien scope identified. Blanket lien vs. specific assets — matters for future financing.
• 6. Default triggers defined. Understand exactly what constitutes default and what the remedy process is.
• 7. Prepayment terms confirmed. Does early payoff reduce total owed? Is there a discount window?
• 8. Stacking restrictions reviewed. Can you take additional financing while this advance is outstanding?
• 9. Bank account access scope confirmed. Understand what access the lender has to your accounts.
• 10. Renewal terms documented. When can you renew, at what terms, and what triggers automatic renewal?
• 11. Personal guarantee scope confirmed. Full, limited, or none — and if limited, what's the cap?
• 12. Dispute resolution terms reviewed. Arbitration vs. litigation; which state's law governs.

The Three Items Most Often Skipped

In practice, operators most frequently skip items 5 (UCC lien scope), 8 (stacking restrictions), and 12 (dispute resolution). These are also the three that create the most downstream problems.

A blanket UCC lien can block you from obtaining a bank line of credit while the RBF is outstanding. Stacking restrictions can prevent you from taking additional capital if your revenue unexpectedly drops.

Both are situations you want to know about before signing, not after.

When to Get Legal Review

For most working capital advances under $75K, a self-directed checklist review is sufficient. For larger advances, the math changes.

At $150K or above, attorney review typically costs $300–$600 and is worth every dollar. Contract attorneys familiar with alternative lending can identify non-standard clauses that the checklist alone won't catch.

Twin Falls and Magic Valley operators can consult the Idaho State Bar's referral service to find attorneys with commercial lending experience in the region.

Red Flags to Identify Before Signing an RBF Agreement

Revenue-based financing agreements vary widely in quality. Most are straightforward and fairly structured — but a minority contain provisions that are either exploitative or create future operational problems. Knowing the specific red flags to look for protects your business from agreements you'd regret.

High-priority red flags in RBF agreements:

• Confession of judgment (COJ) clauses: These allow the lender to obtain a court judgment against you without prior notice or hearing. Some states have banned them; others haven't. If your agreement contains a COJ clause and you're in a state that permits them, negotiate removal before signing.
• Uncapped reconciliation provisions: Some agreements include reconciliation processes that can retroactively increase your total repayment amount. Understand exactly how and when reconciliation is triggered and what the maximum additional exposure is.
• Personal guarantee requirements on revenue-purchase agreements: Legitimate revenue purchase agreements (not loans) typically do not require personal guarantees — the revenue stream is the collateral. A PG requirement on a product marketed as a "non-loan" revenue purchase deserves scrutiny.
• Stacking prohibition without lender consent requirement: Most agreements restrict taking additional advances without lender consent. This is reasonable. What's unreasonable is a provision that allows the lender to declare default for any financing arrangement, including trade credit or supplier terms. Confirm the stacking restriction applies only to comparable financial instruments.
• Vague default definitions: Default provisions should list specific, triggerable events. "Material adverse change" as a standalone default trigger with no definition gives lenders broad discretion to accelerate repayment at will.

Questions to Ask Your Lender Before Signing

A confident, reputable RBF lender welcomes due diligence questions. A lender who deflects or pressures you to sign without adequate time to review the agreement is demonstrating exactly the behavior you should be screening against.

Questions to ask every lender before signing an RBF agreement:

• "What is my total repayment amount?" — should give a specific dollar figure, not a formula
• "What is the holdback percentage and can it be adjusted if my revenue changes significantly?"
• "What specific events trigger a default under this agreement?"
• "Is there a prepayment discount, and if so, at what timeline and percentage?"
• "Does this agreement contain a confession of judgment clause?"
• "What other financing arrangements am I prohibited from taking under this agreement?"
• "Do you report repayment history to any business credit bureaus?"
• "What is your process if I experience a significant revenue decline during the repayment period?"
• "What happens to this agreement if I sell the business before full repayment?"

Document the answers in writing — either via email confirmation or a signed addendum. Verbal assurances that contradict written agreement terms are unenforceable. If a lender won't put favorable terms in writing, those terms don't exist.

Frequently Asked Questions