Funding comparison
Short answer
Choose a revenue-based financing for businesses with consistent revenue seeking performance-linked payments; choose a term loan for a defined project with a clear amount and payoff horizon. Published ranges: Revenue-based financing $10K–$1M, 24–72 hours, credit 550+; term loan $25K–$500K, 48–72 hours, credit 580+. Compare both on total payback and payment size, not the headline rate.
A term loan asks the business to make the same payment every week or month; revenue-based financing asks for a percentage of whatever the business collects. For an owner whose sales swing with the season or a marketing calendar, that difference decides which product fits. The trade-off is cost and control: the term loan is cheaper for a strong file and has a known payoff date, while revenue-based financing flexes with sales and caps the total at a multiple of the advance.
The short version
Revenue-based financing links repayment to business receipts, so payments can move with performance instead of following a fixed amortization schedule.
The short version
A business term loan provides one amount with a defined repayment schedule, making it easier to plan around a specific investment.
How they differ
Revenue-based financing advances $25,000 to $2,000,000 in two to seven business days and is repaid as a fixed percentage of monthly revenue — typically 3% to 10% — until a cap of 1.1x to 1.5x the advance is reached. Underwriting rests on trailing revenue and deposit consistency, published minimums are six to twelve months in business and credit around 550, and the payoff date moves with sales: faster in a good year, slower in a slow one.
A business term loan deposits $10,000 to $500,000 within one to three business days from online lenders and repays a fixed weekly or monthly amount over months to several years at published APRs of roughly 8% to 45%. It wants one to two years in business and credit of 600 or better, with 640-plus for better pricing, and it can be spent on anything.
The cost structures are different in kind. The term loan's cost depends on rate and term and falls if the business repays early; revenue-based financing's cost is the cap, and repaying faster raises the effective annual rate because the same dollars are paid over a shorter period. A business with steady revenue and good credit usually pays less on a term loan; a business with lumpy revenue buys breathing room with the revenue-linked structure.
Side by side
Market ranges compiled from published lender and marketplace guidelines. They are not offers or guarantees; final terms depend on underwriting and the specific funding partner.
| Consideration | Revenue-based financing | Business term loan |
|---|---|---|
| Typical amount | $25,000 – $2,000,000 | $10,000 – $500,000 |
| Term | Until a fixed repayment cap is reached; commonly 6 – 24 months | 6 months – 5 years |
| Time to fund | 2 – 7 business days | 1 – 3 business days (online lenders) |
| Cost (market range) | Repayment cap of 1.1x – 1.5x the advance | APR roughly 8% – 45% depending on credit, revenue and term |
| Payment rhythm | A fixed percentage of monthly revenue (typically 3% – 10%) | Fixed weekly or monthly payment |
| Time in business | 6 – 12 months in business | 1 – 2 years in business |
| Revenue guideline | $15,000+ monthly recurring or predictable revenue | $100,000+ annual revenue |
| Credit guideline | Revenue-driven; 550+ typical | 600+ typical; 640+ for better pricing |
| Typical documents | 6–12 months of bank statements; Revenue or sales dashboard access; Government ID | 6 months of bank statements; Most recent business tax return; Profit-and-loss and balance sheet for larger amounts; Government ID |
| Best for | E-commerce, subscription and seasonal businesses that want payments to flex with sales | One-time investments with a clear payoff: equipment, buildout, expansion, refinancing expensive debt |
| Watch-outs | Fast growth means faster, costlier repayment; Caps are fixed regardless of how quickly you repay; Some providers require read-only access to sales platforms | Personal guarantee is standard; Origination fees of 1% – 5% are common; Prepayment terms vary; ask before signing |
Read the table on the repayment column first: the term loan's fixed payment versus revenue-based financing's percentage of monthly revenue is the whole decision. The term loan wins on cost for a strong file, on predictability and on early-repayment savings; revenue-based financing wins on flexibility, on minimums and on the absence of a fixed payment in a slow month. Both typically carry a personal guarantee and a UCC lien, and neither requires a specific asset.
Worked example
Each table estimates $100,000 at the lower end, midpoint and upper end of the product's published market range. The payment estimator below lets you change the amount or product.
| Scenario | Estimated payment | Total payback | Cost of capital | Basis |
|---|---|---|---|---|
| Lower end of range | $9,167 / month | $110,000 | $10,000 | 1.10x |
| Midpoint | $10,833 / month | $130,000 | $30,000 | 1.30x |
| Upper end of range | $12,500 / month | $150,000 | $50,000 | 1.50x |
| Scenario | Estimated payment | Total payback | Cost of capital | Basis |
|---|---|---|---|---|
| Lower end of range | $3,134 / month | $112,811 | $12,811 | 8.0% APR |
| Midpoint | $4,056 / month | $146,007 | $46,007 | 26.5% APR |
| Upper end of range | $5,107 / month | $183,854 | $83,854 | 45.0% APR |
Borrow $100,000 on a 36-month term loan at the midpoint of the published range and the payment is roughly $4,300 a month with total payback near $154,800; at the low end, which a strong file can reach, it is about $3,150 a month and roughly $13,300 in cost, and paying off early reduces it further.
Take the same $100,000 as revenue-based financing at the midpoint cap of 1.3x and the business repays $130,000 as a fixed share of monthly revenue — perhaps $8,000 a month in a strong month and $5,000 in a weak one — with the cap reached in roughly twelve months at the assumed sales. The total cost is fixed at $30,000 whether the cap is reached in ten months or eighteen, which makes it cheap in a slow year and expensive in a fast one.
At the midpoints: revenue-based financing costs about $10,833 per month with $130,000 in total payback, and business term loan costs about $4,056 per month with $146,007 in total payback. Every figure is an estimate from published ranges, not a quote.
Payment estimator
Illustrative business term loan figures for $100,000 using published market ranges. Switch the product to revenue-based financing to compare. Your offer depends on underwriting.
| Scenario | Estimated payment | Total payback | Basis |
|---|---|---|---|
| Lower end of range | $3,134 / month | $112,811 | 8.0% APR |
| Midpoint | $4,056 / month | $146,007 | 26.5% APR |
| Upper end of range | $5,107 / month | $183,854 | 45.0% APR |
Decision guide
Choose the term loan when revenue is predictable and the file is strong; choose revenue-based financing when revenue is lumpy and a fixed payment would be a risk. If you expect sales to jump, remember that the revenue-linked structure repays faster and its effective rate rises — the cap is fixed, the timeline is not — so a term loan may be cheaper for a business that is about to grow quickly.
Start a no-obligation reviewIndustry fit
Platform payouts make revenue easy to verify and inventory and advertising drive predictable returns, which is why revenue-based financing grew up in this sector; brands with steady sales and strong credit move to term loans for lower cost.
Seasonal swings favour the revenue-linked structure for a business that would struggle with a fixed payment in January; an established restaurant with steady deposits usually finds a term loan cheaper.
Membership revenue is steady enough for term loans; a studio expanding with a marketing push may prefer revenue-based financing while the new members arrive.
Contract revenue that arrives in lumps suits revenue-based financing or a line; firms with retainers and strong credit take term loans for buildouts and hiring.
Qualification
Revenue-based providers underwrite trailing revenue: six to twelve months in business, credit around 550, consistent monthly deposits — often $15,000 or more — and, for e-commerce, platform and advertising data. The offer is sized to a share of annual revenue and the remittance percentage is set so the cap is reached within roughly six to eighteen months at current sales.
Term lenders underwrite the business and the owner: one to two years in business, credit of 600 or better with 640-plus for the best pricing, consistent deposits and a debt schedule that leaves room for the new payment. Larger requests bring tax returns and financial statements, and the purpose matters less than the cash flow.
Using both
Holding both is workable when the combined obligations fit the cash flow. Use the term loan for the defined project and revenue-based financing for the growth spending whose returns are less certain; disclose each to the other lender, because both file UCC liens and both read the other's payment in the bank statements.
Do not use revenue-based financing to make term-loan payments or vice versa. If the term payment is straining the business, refinance it into a longer term; if the revenue remittance is dragging on a fast-growing business, a term loan can pay off the cap early — check whether the provider discounts it.
Watch-outs
1.3x over twelve months is roughly 30% for the year; over six months it is far higher. Convert the cap to an annual figure at your expected payoff pace.
A term loan payment sized to the average month can break the slowest one. Model it against January, not the annual average.
Revenue-based financing repays faster when sales jump, raising the effective rate. A business about to grow quickly may be better off on a term loan.
Both file UCC liens. Disclose everything, or a later lender will find the undisclosed one and decline.
Next step
AIDBIZ reviews the request, identifies which of these products the file realistically fits, and starts without a hard credit pull. There is no obligation, and no product is guaranteed.
Common questions
Usually not for a strong file: a term loan at the low end of its range costs less than a 1.1x to 1.5x cap. It can be cheaper in a slow year, because the cap is fixed while the timeline stretches, and it is more available to businesses with credit around 550.
As a fixed percentage of monthly revenue, typically 3% to 10%, remitted from the bank account or platform payouts until the cap is reached. Good months repay faster; slow months repay less.
The remittance drops with it and the payoff date moves out. The cap does not change, which is the product's main advantage over a fixed term-loan payment.
A term loan, yes, and it usually saves interest. Revenue-based financing, sometimes: the cap is owed regardless unless the contract offers an early-payoff discount, so ask before signing.
Published guidelines are around 550 for revenue-based financing, where revenue carries the file, and 600 or better for a term loan, with 640-plus for the best pricing.
A term loan from an online lender publishes one to three business days; revenue-based financing publishes two to seven because the provider analyses revenue and, for e-commerce, platform data.
Revenue-based financing, if the season's sales will repay it and a fixed payment before the season would hurt; a line of credit is often better than either for recurring inventory cycles.
In most cases, yes, and both file a UCC lien on the business. Neither requires a specific asset as collateral.
Yes, when the combined obligations fit the cash flow and each lender knows about the other. Use the term loan for the defined project and the revenue-linked product for growth spending.
AIDBIZ is a team of small-business funding specialists, not a lender. The amounts, rates, factor rates, fees, timelines and minimums on this page are published market guidelines compiled from lender and marketplace sources and are shown for comparison only. They are not offers; approval, cost, speed and amount depend on underwriting, verification and the terms of the specific funding partner. No hard credit pull is required to start a review.