TL;DR: Revenue-based financing (RBF) is funding repaid as a fixed percentage of a company's monthly revenue until a predetermined total, a multiple of the amount advanced, is reached. It is distinct from venture debt, which is a fixed-principal term loan. Flow Capital provides venture debt, not RBF.
Revenue-based financing provides capital in exchange for a fixed share of future revenue. Rather than fixed monthly instalments, the borrower repays a set percentage of monthly revenue, so payments rise and fall with the business. Repayment continues until the company has paid back a capped multiple of the original amount, commonly in the range of 1.3 to 1.8 times.
RBF is typically used for smaller amounts and shorter horizons than venture debt, and it is most associated with funding specific, revenue-linked activities such as marketing or inventory. It does not usually involve warrants or board involvement.
The two are often confused, but they are different instruments. Venture debt is a term loan with a fixed principal, a defined interest rate, and a set maturity, sized against the broader business (for example, a multiple of ARR). RBF is repaid as a variable percentage of revenue up to a repayment cap, with no fixed term.
Flow Capital is a venture debt provider, not a revenue-based financing provider. Flow advances term facilities, up to 1x ARR, interest-only with a bullet repayment at maturity, rather than taking a percentage of monthly revenue. The distinction matters when comparing options, because the structure, cost, and use cases are not the same.
Is revenue-based financing the same as venture debt? No. RBF is repaid as a share of revenue up to a cap; venture debt is a fixed-principal term loan repaid with interest. They suit different needs.
Is RBF dilutive? Generally no equity is given up, so it is non-dilutive in the ownership sense, though the effective cost of capital can be high relative to the amount and term.
Related terms: Venture Debt · Non-Dilutive Financing · Minimally Dilutive Capital · Growth Capital
