Short answer
Revenue-based finance is repaid as a fixed share of monthly revenue until a set total is paid back; venture debt is a term loan with fixed repayments, often with a small warrant. Revenue-based finance suits smaller, shorter needs such as marketing spend, with no warrants. Venture debt suits larger amounts over three to four years for venture-backed companies. Neither requires selling shares in the way equity does.
Key facts
| Venture debt | Revenue-based finance | |
|---|---|---|
| Repayment | Interest-only, then fixed monthly or quarterly | % of monthly revenue |
| Typical term | 3–4 years | 6–24 months |
| Typical size | £1m+ | A multiple of monthly revenue |
| Cost | Interest, fee, often a warrant | Fixed fee (a total repayment cap) |
| Dilution | None, or small if warrants | None |
| Needs VC backing | Usually | No |
How revenue-based finance works
The lender advances a lump sum. The company repays a fixed percentage of each month's revenue until it has repaid an agreed total, such as 1.1–1.3 times the advance. Repayments rise and fall with revenue. It is often used for marketing or inventory that pays back within months.
How venture debt differs
Venture debt is sized for bigger strategic goals and repaid over years, with an interest-only period first. It is usually only available to companies with institutional investors. In return for the longer term and larger size, lenders often take a small warrant. See what is venture debt.
Which should you choose?
- Revenue-based finance if you need a smaller amount for spending that pays back quickly, your revenue is predictable, and you don't have VC backing.
- Venture debt if you need a larger amount to extend runway to a milestone, you have institutional investors, and you want a longer repayment period.
Related: Venture Debt →
Related questions
Is revenue-based finance cheaper than venture debt?
Not always. A 1.2x repayment cap over 12 months is an effective annual cost well above most venture debt rates.
Can I have both?
Sometimes, but lenders will want to agree who ranks first. Check your existing agreements before taking on more debt.