Revenue-Based Financing: A Flexible Growth Model for Tech Startups

Revenue-Based Financing (RBF) is an alternative financing model where a company receives capital and repays a fixed percentage of future revenues to the investor. Unlike traditional bank loans, there are no fixed monthly installments or interest rates. Repayments rise and fall with revenue. Moreover, no equity needs to be given up.

This financing model is particularly suitable for technology-oriented companies with recurring revenues, such as software subscriptions or digital services. In this article, you’ll learn how RBF works, its advantages and disadvantages, and what founders should pay attention to.

How does RBF work?

With RBF, your company receives a capital injection and commits to repaying a fixed percentage (for example, 5–10%) of monthly revenue to the investor. These payments continue until a predefined repayment cap is reached – typically 1.5 to 3 times the original investment.

The special feature: repayments adjust to your revenue development. In weaker months, the burden decreases; in stronger months, it increases. This reduces the risk of fixed installments and helps preserve liquidity. Funding decisions are usually based on revenue data, and traditional collateral is often not required.

Advantages of RBF

• No dilution: Founders retain full ownership of their shares.
• Flexible repayment: Payments are tied to revenue, easing pressure during weaker phases.
• Fast approval: Decisions are often data-driven and faster than traditional loans.
• Growth-oriented: Investors profit directly from success – interests are aligned.

Disadvantages of RBF

• Higher total costs: Repayment is usually higher than for a bank loan.
• Regular obligations: Even in low-revenue months, repayments must be made.
• Only suitable for revenue-generating firms: Companies without stable income are not eligible.
• Limited applicability: Not ideal for highly seasonal or irregular business models.

Who is RBF suitable for?

RBF is best for digital, scalable business models with predictable revenues:

• SaaS companies and subscription models
• Products with high gross margins to cover repayments
• Startups seeking growth capital without giving up equity
• Companies with a proven revenue track record
• Firms with moderate capital needs compared to revenue levels

❌ Not suitable for pre-revenue startups or highly seasonal businesses.

RBF in Germany and Austria

In Germany and Austria, RBF is becoming increasingly well-known. Tech-focused companies are looking for flexible financing options to fuel growth without dilution.

If your business has recurring revenues and a growth trajectory, RBF can be a modern alternative to traditional financing.

Our conclusion

Revenue-Based Financing is a flexible way to finance your company without giving up equity or committing to rigid liabilities. For business models with predictable revenues, RBF can be a powerful growth lever.

As with any financing, you should carefully review repayment structures, total costs, and cashflow implications. If your model is predictable and scalable, RBF can be an attractive option.