# Revenue-Based Financing

Model how a revenue-based financing advance repays from sales, then test the returns across a growing portfolio of deals.

- Canonical: https://finamodel.com/templates/revenue-based-financing
- Excel download: https://finamodel.com/templates/revenue-based-financing.xlsx
- Category: Credit
- Model type: Credit model
- Difficulty: Intermediate
- Audiences: Investors & analysts, CFOs & FP&A, Fintech lenders, Credit funds, Recurring-revenue founders, Capital markets analysts
- Tags: rbf, revenue-based financing, alternative finance, non-dilutive, credit

## Overview

Revenue-based financing is repaid as a share of a company's sales, so the pace of repayment depends on how the borrower performs. This model helps lenders and founders see the relationship between revenue growth, repayment terms, and time to payback.

Use it to assess an individual advance or a portfolio of originations. You can test how pricing, repayment rates, funding costs, and credit losses affect the economics before committing capital.

## What's included

- Borrower revenue path: Month-1 base plus monthly growth compounded across 36 months
- Advance terms: advance amount, factor multiple, remit percent of revenue, term cap
- 36-month single-advance roll-forward: revenue, remit due, opening balance, term-capped remit, actual remit, closing balance, cumulative repaid, payback flag, provider net cash flow
- 24-month rolling-cohort portfolio with 12 cohort rows convolved against the single-advance curve via INDEX
- Portfolio aggregates: new advances, total outstanding, gross remittance, default losses, net remittance, funding cost, opex, provider net margin
- Returns: realised MOIC, payback period via MATCH, weighted-average life via SUMPRODUCT, monthly IRR, annualised IRR
- Portfolio returns: gross and net MOIC, realised loss rate, provider net margin
- Spread block: single-advance annualised IRR less cost of funds, opex drag, expected loss
- Sensitivity: 7×7 grid for payback months (closed-form geometric solution capped at term) and annualised IRR
- Checks: repaid cap, remit bound, closing balance non-negative, portfolio non-negative, factor floor, term cap consistency
- Sensitivity: 7x7 grid for payback months (closed-form geometric solution capped at term) and annualised IRR

## Revenue-Based Financing Model: How the Template Works

This revenue based financing model template lets you examine how an advance repaid through a share of monthly sales behaves. It covers single deals and a 24-month portfolio of originations, showing the link between borrower growth, repayment terms, and the provider's returns.

The model helps you evaluate cash timing, risk, and break-even conditions before committing capital.

### Inputs and Operating Drivers

The Assumptions sheet sets the drivers for both a single advance and a rolling portfolio. For the borrower, you enter starting monthly revenue and a growth rate, which together shape how quickly the remittance grows.

- For the advance itself, you specify the amount, the factor multiple, the remit percentage, a term cap in months, and an origination fee. Portfolio inputs add the number of deals per month, an origination window, and a facility size.

- Risk inputs include a default rate, loss given default, and a recovery lag. Provider economics add a cost of funds and an operating expense percentage.

Four stress multipliers and sensitivity axis bounds allow scenario adjustment. All inputs are entered as positive numbers.

### Calculation Flow from Single Advance to Portfolio

Each month, the borrower's revenue grows from its starting base, and the remit due equals that revenue multiplied by the remit percentage. The repayment cap is the advance amount times the factor, so total contractual repayment stops once the outstanding balance is cleared.

- Actual remittance is the lower of the remit due and the remaining balance; once the balance reaches zero, remittance ends. A hard term cap limits payback to a fixed number of months.

- If the borrower's revenue is too low or the remit percentage too small, the deal may not reach the factor within the term cap, and the shortfall is reported as a term-cap loss on the Returns sheet.

- The single-advance schedule is the building block for the portfolio. Each monthly cohort follows the same repayment curve, scaled by the number of deals and offset by its origination month.

- Portfolio aggregates track facility utilisation, defaults, recoveries, funding cost, operating expense, and net margin. Defaults reduce net outstanding through a cumulative corkscrew, while recoveries arrive with a lag and are added back as cash.

The portfolio section also compares new advances, cumulative originations, and facility drawn to ensure the warehouse limit is respected.

### Outputs: Returns, Vintages, and Stress Views

The Returns sheet brings together the key economics for the single advance and the portfolio. For a single deal, it shows the money multiple and payback month, along with a flag for whether payback was achieved, the realised factor versus the contracted factor, any term-cap loss, the weighted-average life, and both monthly and annualised internal rates of return.

- Portfolio outputs include gross and net money multiples, default losses, recoveries, realised loss rate, provider net margin, and peak facility utilisation. A spread block compares the single-advance internal rate of return against cost of funds, operating expense, and expected loss.

- The Vintages sheet provides per-cohort returns for up to 12 vintages, showing gross and net internal rates of return, money multiples, and payback, with each vintage truncated to the months remaining inside the 24-month observation window. The Stress sheet tests five scenarios: higher default rates, a higher loss given default, slower growth, and a combined worst case.

It also reports a break-even default rate and a break-even cost of funds. Stress figures use a linear money-multiple yield, which is mechanically lower than the periodic internal rate of return for an amortising stream, so they serve as a conservative read on outcomes.

### Practical Use and Validation

This template is useful when you need to assess how repayment pace and returns move together. A lender can vary the remit percentage, factor multiple, or borrower growth to see the effect on payback time and realised money multiple.

- The portfolio section supports testing how origination volume, facility size, and default assumptions interact, including whether net outstanding stays within the facility limit. The stress table helps identify break-even thresholds, such as the default rate or cost of funds at which provider economics turn negative.

- The checks sheet validates structural identities, including repayment cap, remit bounds, non-negative balances, factor minimum, term-cap consistency, facility breach, and recovery-lag bounds.

## Built for the RBF underwriter

When the question is "what factor and remit percent produce a target IRR on this borrower's revenue path?", a single-advance roll-forward plus a 7×7 sensitivity grid is the cleanest answer. This template gives fintech lenders, credit funds, and recurring-revenue founders an audit-ready workbook that ties every dollar of remittance back to the advance terms, the borrower revenue path, and the term cap.

## Designed for one-edit responsiveness

Every input - advance amount, factor multiple, remit percent, term cap, borrower revenue path, default rate, LGD, cost of funds, opex percent, portfolio cadence - is a single named-range cell on Assumptions. Flex any one and the single-advance returns, the portfolio aggregates, the spread to funding, and the sensitivity grids all recompute. No formula rewrites.

## Honest about term-cap binding

If the borrower revenue is too thin for the remit percent to recover the factor in the term cap window, the model surfaces it: realised MOIC falls below the contracted factor, the M36 payback flag stays at 0, and the cumulative repaid line ends short of advance × factor. Most RBF books underprice this risk - the template lets you size it explicitly.

## Built for the RBF underwriter

When the question is "what factor and remit percent produce a target IRR on this borrower's revenue path?", a single-advance roll-forward plus a 7×7 sensitivity grid is the cleanest answer. This template gives fintech lenders, credit funds, and recurring-revenue founders an audit-ready workbook that ties every dollar of remittance back to the advance terms, the borrower revenue path, and the term cap.

## Designed for one-edit responsiveness

Every input - advance amount, factor multiple, remit percent, term cap, borrower revenue path, default rate, LGD, cost of funds, opex percent, portfolio cadence - is a single named-range cell on Assumptions. Flex any one and the single-advance returns, the portfolio aggregates, the spread to funding, and the sensitivity grids all recompute. No formula rewrites.

## Honest about term-cap binding

If the borrower revenue is too thin for the remit percent to recover the factor in the term cap window, the model surfaces it: realised MOIC falls below the contracted factor, the M36 payback flag stays at 0, and the cumulative repaid line ends short of advance × factor. Most RBF books underprice this risk - the template lets you size it explicitly.

## Workbook structure

### Cover

Workbook overview, sheet legend, and tab-colour key for navigation.

- Title and scope framing
- Sheet-by-sheet purpose summary
- Tab-colour legend

### Assumptions

Every driver in one sheet: borrower revenue, advance terms, portfolio cadence, risk, provider economics, sensitivity axis bounds.

- Borrower Month-1 revenue and monthly growth rate
- Advance amount, factor multiple, remit percent of revenue, term cap
- Portfolio: new advances per month, origination window
- Risk: annual default rate, LGD, recovery lag (reference)
- Provider economics: cost of funds, opex percent of outstanding
- Sensitivity axis bounds: factor minimum and step, remit minimum and step

### Advance

36-month single-advance payback roll-forward.

- Borrower revenue compounds at the monthly growth rate from the M1 base
- Remit due = revenue × Adv_Remit_Pct
- Opening balance starts at Adv_Amount × Adv_Factor
- Term-capped remit zeroes after the term cap month
- Actual remit = MIN(term-capped remit, opening balance)
- Closing balance = opening − actual remit
- Cumulative repaid, payback reached flag, and provider net cash flow stream

### Portfolio

24-month rolling-cohort portfolio.

- New advances each month = Port_New_Per_M × Adv_Amount during origination window
- Twelve cohort rows INDEX into Advance!Closing and Advance!Remit at the right age offset
- Total outstanding and gross remittance = SUM across cohort rows
- Default losses = outstanding × Risk_Default / 12 × Risk_LGD
- Net remittance = gross − defaults + recoveries (recoveries netted into LGD)
- Funding cost = outstanding × Fund_Cost / 12; opex = outstanding × Fund_Opex_Pct / 12
- Provider net margin = remit gross − defaults − funding − opex

### Returns

Single-advance and portfolio metrics plus a spread block.

- Single advance: MOIC, payback period (MATCH on payback flag), WAL (SUMPRODUCT of remit × month / SUM remit), monthly IRR (IRR of provider cash flow), annualised IRR
- Portfolio: total originated, gross / net remittance, default losses, gross / net MOIC, realised loss rate, provider net margin
- Spread: single-advance IRR less cost of funds, opex drag, expected loss (default × LGD), and the resulting net spread

### Sensitivity

Factor × Remit % grids for payback and IRR.

- 7×7 grid axes from Sens_Factor_Min / _Step and Sens_Remit_Min / _Step
- Grid 1 - Payback months: T = LN(1 + F·A·g / (p·R)) / LN(1+g), capped at Adv_Term_Cap
- Grid 2 - Annualised IRR: Factor^(12/payback) − 1
- Closed-form only - does not reference the discrete Advance sheet roll

### Checks

Validation checks resolve to 0 when the model is internally consistent.

- Repaid cap: SUM(actual remit) ≤ Adv_Amount × Adv_Factor
- Remit bound: Adv_Remit_Pct in [0, 1]
- Closing balance non-negative
- Portfolio outstanding non-negative
- Factor floor: Adv_Factor ≥ 1 (provider contracts for at least principal)
- Term cap ≥ recovery lag months

### Cover

Workbook overview, sheet legend, and tab-colour key for navigation.

- Title and scope framing
- Sheet-by-sheet purpose summary
- Tab-colour legend

### Assumptions

Every driver in one sheet: borrower revenue, advance terms, portfolio cadence, risk, provider economics, sensitivity axis bounds.

- Borrower Month-1 revenue and monthly growth rate
- Advance amount, factor multiple, remit percent of revenue, term cap
- Portfolio: new advances per month, origination window
- Risk: annual default rate, LGD, recovery lag (reference)
- Provider economics: cost of funds, opex percent of outstanding
- Sensitivity axis bounds: factor minimum and step, remit minimum and step

### Advance

36-month single-advance payback roll-forward.

- Borrower revenue compounds at the monthly growth rate from the M1 base
- Remit due = revenue × Adv_Remit_Pct
- Opening balance starts at Adv_Amount × Adv_Factor
- Term-capped remit zeroes after the term cap month
- Actual remit = MIN(term-capped remit, opening balance)
- Closing balance = opening − actual remit
- Cumulative repaid, payback reached flag, and provider net cash flow stream

### Portfolio

24-month rolling-cohort portfolio.

- New advances each month = Port_New_Per_M × Adv_Amount during origination window
- Twelve cohort rows INDEX into Advance!Closing and Advance!Remit at the right age offset
- Total outstanding and gross remittance = SUM across cohort rows
- Default losses = outstanding × Risk_Default / 12 × Risk_LGD
- Net remittance = gross − defaults + recoveries (recoveries netted into LGD)
- Funding cost = outstanding × Fund_Cost / 12; opex = outstanding × Fund_Opex_Pct / 12
- Provider net margin = remit gross − defaults − funding − opex

### Returns

Single-advance and portfolio metrics plus a spread block.

- Single advance: MOIC, payback period (MATCH on payback flag), WAL (SUMPRODUCT of remit × month / SUM remit), monthly IRR (IRR of provider cash flow), annualised IRR
- Portfolio: total originated, gross / net remittance, default losses, gross / net MOIC, realised loss rate, provider net margin
- Spread: single-advance IRR less cost of funds, opex drag, expected loss (default × LGD), and the resulting net spread

### Sensitivity

Factor × Remit % grids for payback and IRR.

- 7×7 grid axes from Sens_Factor_Min / _Step and Sens_Remit_Min / _Step
- Grid 1 - Payback months: T = LN(1 + F·A·g / (p·R)) / LN(1+g), capped at Adv_Term_Cap
- Grid 2 - Annualised IRR: Factor^(12/payback) − 1
- Closed-form only - does not reference the discrete Advance sheet roll

### Checks

Validation checks resolve to 0 when the model is internally consistent.

- Repaid cap: SUM(actual remit) ≤ Adv_Amount × Adv_Factor
- Remit bound: Adv_Remit_Pct in [0, 1]
- Closing balance non-negative
- Portfolio outstanding non-negative
- Factor floor: Adv_Factor ≥ 1 (provider contracts for at least principal)
- Term cap ≥ recovery lag months

## Features

- **Closed-form sensitivity grid:** Payback months come from T = ln(1 + F * A * g / (p * R)) / ln(1 + g), capped at the term cap. The IRR grid then uses Factor^(12/payback) - 1. The whole 7x7 sensitivity is two formulas, recomputes instantly, and never references the discrete roll-forward.
- **Cohort-matrix portfolio convolution:** Twelve cohort rows each INDEX into the single-advance Closing and Remit rows at the right age offset. Edit the advance terms or cadence on Assumptions and the entire 24-month portfolio reshapes - no duplicated math, no copy-paste.
- **Honest about term-cap binding:** When borrower revenue is too thin to recover the factor in the term cap window, the model surfaces this via realised MOIC < factor, the M36 payback flag staying at 0, and the cumulative repaid line falling short of advance × factor.

## Use cases

- **Deal pricing:** Set the target IRR or payback period the credit team wants and read off the factor × remit % combination that delivers it from the Sensitivity grid. Then flex the borrower revenue path in Assumptions to stress the result.
- **Portfolio book sizing:** Set the new-advances-per-month cadence and origination window, then read provider net margin on the Returns sheet. Flex the default rate and LGD to size the loss buffer the portfolio needs to clear the cost of funds.
- **Education on revenue-linked repayment:** Walk a board or a new analyst through why RBF returns are constrained by the borrower's revenue growth and remit capacity - and why a 1.30x factor on a slow-growing book often produces a sub-15% IRR after losses.

## Frequently asked questions

### What is revenue-based financing?

Revenue-based financing (RBF) is a non-dilutive alternative to debt and equity where a provider pays an upfront cash advance to a recurring-revenue borrower and recovers a fixed multiple of the advance - the factor - by collecting a percentage of the borrower's monthly revenue until either the cap is reached or a hard term cap binds. Pipe, Capchase, and Clearco are the well-known platforms; the structure is common across SaaS, ecommerce, and DTC.

### How is RBF different from factoring or a term loan?

Factoring is invoice-by-invoice: the provider buys specific receivables at a discount. A term loan amortises on a fixed schedule with explicit interest. RBF has no schedule and no interest - the repayment timing is set by the borrower's revenue, the total repayment is fixed at advance × factor, and the provider's IRR depends on how quickly the revenue gets there.

### Why does my portfolio MOIC look low?

The 24-month portfolio horizon catches most cohorts mid-payback - late cohorts originated in months 9–12 only see 12–15 months of remit before the window closes. The single-advance MOIC on the Returns sheet (which runs to month 36) is the steady-state number. Extend the portfolio horizon (PORT_PERIODS in the builder) if you need to see the book fully unwind.

### Does the model handle defaults explicitly?

Partially. Defaults are computed as outstanding × annual default rate / 12 × LGD and netted on the Net Remittance line. The model does not simulate default timing (typically months 6–18 in real RBF books) or separate recovery cash flows - recoveries are folded into the LGD. For a default-timing-aware build, pair with the abs-clo or loan-portfolio-cdr templates.

### Can I extend the advance horizon or portfolio window?

Yes. The builder is parameterised by ADV_PERIODS (36) and PORT_PERIODS (24). Bump either, rerun, and the cohort matrix, returns metrics, and sensitivity grid all extend automatically. The sensitivity closed-form is bounded by Adv_Term_Cap, so update that on Assumptions if you push ADV_PERIODS up.

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