For many Canadian small businesses, getting a traditional loan can be frustrating and time-consuming. Banks usually ask for a lot of paperwork, collateral, and long-term promises that may not suit a company as it grows. Flexible ways to fund projects are now more important than they used to be.
Revenue-based financing is the solution in this situation. It allows businesses to borrow money without having to follow the strict rules of regular loans. Repayments can change with the company’s earnings, which is useful when the economy is unpredictable.
In Canada, more entrepreneurs in retail, e-commerce, and service industries are choosing this funding method. According to a report, “The Canada Revenue-Based Financing market had a market share of USD 143.29 million in 2024 and is projected to grow at a CAGR of 60.8% .”
Since Capital Advance is a leader in providing easy and customized financing, it’s a good idea to learn about this model and see if it’s right for your business.
What is Revenue-Based Financing?
Revenue-based financing (revenue-based loans) is a way to get business funding where your company’s revenue determines how much you pay back. Rather than making the same payment every month, your business pays a percentage of its weekly or bi-weekly gross income until the whole amount, including fees, is repaid.
The total you must repay is usually based on a factor rate, not an interest rate. If a business gets $50,000 with a factor rate of 1.2, it must pay back $60,000, divided into weekly or bi-weekly payments based on the company’s earnings.
People are choosing revenue-based financing firms in Canada because they are flexible. Traditional lenders may turn down a business with low credit or little collateral, but revenue-based financing lenders mainly look at your past and future earnings. As a result, SMEs can now get the funding they need, which would be hard to secure otherwise.
How Does Revenue-Based Financing Work?
Learning about revenue-based financing is necessary to see if it fits your business. Getting a loan this way is not complicated, but it differs from getting a traditional loan.
After a business is approved, the lender gives a single payment and takes a share of the company’s future earnings. A certain percentage of your gross revenue — usually between 5% and 20% — is taken out each month until you have paid back the amount you agreed on.
The length of time you take to repay your loan is flexible. If your income is high, you pay more; if it’s low, your repayment is less. Because of this, seasonal businesses or those with changing incomes find revenue-based funding very appealing.
For example, a business gets $100,000 from a revenue-based loan, and it must pay back $120,000, agreeing to pay 10% of its revenue monthly. When the business makes $50,000 in a month, it pays $5,000. If you make $20,000, you must pay $2,000 for that month. This pay-as-you-earn model helps maintain healthy cash flow, reducing financial strain.
At Capital Advance, we specialize in providing tailored revenue-based financing in Canada, ensuring the repayment terms work in harmony with your actual business performance.
Who Should Consider Revenue-Based Financing?
These firms usually help small and medium-sized businesses with regular monthly income, even if it varies. If your business brings in regular revenue but doesn’t have many assets or a long credit history, this type of funding may be best.
Fast-growing businesses, mainly in tech, SaaS, digital marketing, or subscription industries, may also find this helpful. Even if they can’t get traditional bank loans, these businesses usually enjoy high profits and reliable revenue.
Canadian e-commerce retailers, service providers, restaurants, and franchised businesses increasingly use business funding based on revenue to help them grow. Because repayment is flexible, these businesses can grow without worrying about their cash flow.
Most revenue-based loan providers require a certain amount of revenue before considering your application. Although the rules may differ, most firms, such as Capital Advance, will check your business’s monthly revenue to confirm it is stable enough for repayment. When your revenue is substantial, you have a greater chance of getting favourable terms.
Pros and Cons of Revenue-Based Financing
Revenue-based financing, as with other methods, has both pros and cons. Flexibility is the most important advantage. Because repayments change with your income, your business faces less stress when sales are lower. As a result, you can handle your daily expenses without giving up on your long-term plans.
Another plus is how quickly it can be done. It often takes a lot of time to apply for and receive approval for a traditional business loan. Unlike banks, companies like Capital Advance can give you funds within days, which is very helpful for urgent opportunities.
Even so, there are some disadvantages. If your business grows and pays back the loan early, the cost of revenue-based financing can be higher than traditional financing. Besides, because lenders face greater risks, their interest rates may be higher than usual.
For many businesses, the positives of revenue-based business loans, such as not needing collateral and not losing equity, are more important than the negatives, especially in Canada’s tough business environment.
Eligibility Criteria for Revenue-Based Business Loans
You must meet specific requirements that prove your company’s revenue is stable to get small business loans based on revenue. Although each lender has its own rules, there are some standard things to consider when applying.
Most of the time, Canadian businesses must be up and running for at least six months and have a steady monthly revenue of usually $10,000 or more. You’ll have to present bank statements, monthly sales reports, and possibly summaries from your merchant processor. Revenue-based business funding is different from traditional loans because your credit score is not always important, but it may still be checked.
Revenue-based financing lenders focus on your company’s performance, not just its credit history. As a result, revenue-based funding is easier for businesses with high sales to obtain, even if they have little financial documentation.
At Capital Advance, our approval process is clear and fast. We look at every business individually, not just following a list of criteria. We want to help you get business funding based on your revenue and support your future growth.
When to Use Revenue-Based Financing Over Other Options
Knowing when to use revenue-based financing instead of other options can help you maximize it. Consider this model if your business earns regular income but does not meet traditional bank requirements.
It is most useful when you need money for a short period, such as buying inventory, running marketing campaigns, upgrading equipment, or expanding. Usually, these initiatives help you repay the loan quickly, so you don’t have to worry about an overstretched cash flow.
With revenue-based loans, you can keep all the ownership of your business. Since you don’t have to pay the same amount each month, it helps avoid financial problems when your income is lower. This is why many Canadian entrepreneurs consider it a strategic choice when exploring loans based on revenue.
When you partner with Capital Advance, you’ll get advice that fits your business and your way of earning money, helping you use your funds wisely.
Choosing the Right Revenue-Based Financing Lender
Choosing the right partner for your revenue-based loans is crucial for a positive outcome. There is a difference in how transparent, flexible, and supportive revenue-based financing lenders are in Canada. For this reason, it’s essential to do your homework.
First, check the lender’s history and how others view them. The websites of established revenue-based financing companies usually have clear online reviews, client testimonials, and case studies. Choose lenders that focus on revenue-based funding for Canadian small businesses, as they are more aware of the country’s rules and trends.
After that, look at the terms being offered. A reliable lender will ensure you know the total amount you need to pay, how you need to repay it, and the interest rate before you sign. Stay away from companies that do not clearly explain their fees or are reluctant to explain how revenue-based loans function. It’s important to find out when payments are collected and how the company handles changes in its income.
Both flexibility and communication matter a lot. A good funding partner should help you through your financing period and be ready to assist when your business is not as busy. That’s what makes Capital Advance different. We ensure that every business funding offer we provide fits your revenue and financial goals. Choosing the right lender means you have a partner who helps you grow and adapts to your evolving needs as your company grows.
Conclusion
Revenue-based financing is now a well-known option in Canada. Many businesses choose it as a quick, flexible way to get funding that grows with them. Because repayment is based on business results, revenue-based loans are a smart and flexible option for getting capital. They help entrepreneurs manage their finances better and make decisions that matter.
If you’re interested in revenue-based financing to grow, contact us today. We at Capital Advance can help you decide if it’s right for you. We recognize the special needs of Canadian companies and provide funding that fits with your earnings, not against them.
