- 1Providers marketing percentage-of-sales payments range from loans to non-loan purchases.
- 2Names such as 'MCA' or 'RBF' are colloquial; the contract defines how a product works.
- 3Loans carry hard term lengths even when payments flex with sales.
Revenue-based financing has become popular enough to spawn its own variations, and not all of them are loans. The terms in common use are mostly colloquial, so the details live in the individual contracts.
Loans versus non-loans
The distinction matters. Loans are absolutely repayable, while non-loans structured as purchases tend not to be. Loans also tend to have a hard term length built in, even when payments are a percentage of sales, which applies if a merchant's sales run well below projections.
A sample of the market
A snapshot of providers that market a percentage-of-sales payment mechanism shows how varied the labels are:
- Marketed as a merchant cash advance and not a loan: DoorDash Capital, Walmart Capital, eBay Seller Capital, Lightspeed Capital, Shopify Capital, Pipe and Wayflyer.
- Marketed as revenue-based financing, not a loan: a coalition of funders.
- Marketed as revenue-based financing, structured as a loan: Founders First Capital Partners, the Washington State RBF Fund and the NYC Future Fund.
- Marketed as a cash advance: Clearco, which is only partially paid through a percentage of sales and is not a loan.
- Marketed as a business loan, paid through a percentage of sales: Square Loans, Shopify Capital's loan product and PayPal Working Capital.
The direction of travel
The broader trend is clear: relying on a merchant's revenue to determine payments is expanding rapidly. For brokers, funders and merchants, the practical takeaway is to read the contract to see how a given product works rather than relying on the name.
Source reporting: deBanked.
