Revenue-Based Financing in India: Flexible Business Loans
Revenue-Based Financing in India: Flexible Business Loans Without Giving Up Equity
Revenue-based financing (RBF) is a type of business funding where a lender provides capital in exchange for a percentage of your future revenue, until a pre-agreed total repayment amount (called the cap) is reached. Unlike a term loan, there are no fixed EMIs. When your revenue is high, you repay more. When business slows down, your repayment reduces proportionally.
RBF is growing quickly in India, especially among D2C brands, SaaS companies, and e-commerce businesses that have predictable recurring revenue but do not want to dilute equity by raising VC funding.
Overview
RBF is not a traditional bank product. It sits between venture debt and a conventional term loan. Lenders like GetVantage, Velocity Finance, Recur Club, and N+1 Capital have built platforms in India that offer RBF to digital-first businesses.
The financing is fast (often within days, not weeks), does not require collateral, and is structured entirely around the company’s revenue stream. Banks and NBFCs are now entering this space as well, but the pure RBF model is currently dominated by FinTech platforms.
How RBF Works in Practice
Say you need Rs 50 lakh for inventory and marketing. An RBF lender offers you Rs 50 lakh with a repayment cap of Rs 62.5 lakh (a 1.25x factor). You agree to remit 5% of your monthly revenue until Rs 62.5 lakh is fully repaid. If your monthly revenue is Rs 25 lakh, you pay Rs 1.25 lakh that month. If revenue drops to Rs 10 lakh, you pay Rs 50,000. The loan ends when the cap is reached, regardless of how many months it takes.
Cost of RBF Capital
| RBF Provider | Typical Capital Range | Repayment Cap (Factor) |
|---|---|---|
| GetVantage | Rs 10 lakh to Rs 2 crore | 1.1x to 1.35x |
| Velocity Finance | Rs 5 lakh to Rs 1 crore | 1.1x to 1.3x |
| Recur Club | Rs 25 lakh to Rs 10 crore | 1.05x to 1.2x |
The effective annualized cost of RBF depends on how quickly you repay. If you repay in 6 months, the annualized cost can be 25% to 40%. Over 12 months, it is closer to 15% to 20%. Always calculate the annualized equivalent before comparing to a term loan.
Eligibility
- Business with monthly recurring revenue of at least Rs 5 lakh to Rs 10 lakh (varies by provider)
- Minimum 6 to 12 months of operating history with digital revenue
- Revenue primarily from online channels (Shopify, Amazon, app subscriptions, SaaS MRR)
- GST-registered business in India
- No active insolvency proceedings
Documents Required
- GST returns (last 6 to 12 months)
- Bank account statements
- Linked marketplace or payment gateway data (Razorpay, Stripe, Amazon Seller Central access)
- Incorporation certificate and director KYC
- Last 2 years’ ITR or audited financials (for larger amounts)
Application Process
- Apply on the RBF platform: Most providers have a fully digital onboarding process. Connect your payment gateway or bank account to share revenue data.
- Automated underwriting: The platform analyzes your revenue history, growth trend, and churn rate.
- Offer received: You receive a term sheet within 24 to 72 hours specifying the capital amount, repayment cap, and revenue percentage.
- Legal documentation: Sign a revenue purchase agreement (not a loan agreement in the traditional sense).
- Capital disbursement: Funds are transferred within 3 to 5 working days.
- Automated repayments: A fixed percentage is debited from your revenue account (usually via a mandate on your payment gateway).
Frequently Asked Questions
Is RBF treated as a loan or equity in India?
Legally, RBF is structured as a revenue purchase or a non-convertible debt instrument in India. It is not equity, and you do not give up any ownership stake. However, the RBI is still evolving its regulatory stance on RBF structures, so check with a CA or legal advisor before signing.
Can traditional brick-and-mortar businesses access RBF?
Most RBF platforms focus on digitally trackable revenue (online sales, SaaS, app-based). Offline businesses with verifiable GST and bank-based revenue can apply to some providers, but the digital-first model is the current sweet spot for RBF in India.
What happens if my business shuts down mid-repayment?
If revenue drops to zero, repayments stop automatically (since they are pegged to revenue). However, the residual outstanding amount typically remains due, and the lender may have rights to recover it through other means as per the signed agreement.
