Two different answers to the same question
Both revenue-based finance and term loans provide upfront capital that is repaid over time. Beyond that similarity, they differ significantly in how repayment works, who they suit, and what they cost.
Term loans: the traditional model
A term loan provides a fixed sum, repaid with interest over a fixed period in regular (usually monthly) instalments. The monthly payment is known from day one and does not change.
Example:
- Loan: £100,000
- Term: 36 months
- Interest rate: 9% APR
- Monthly repayment: ~£3,180
- Total repaid: ~£114,500
Term loans work well when:
- Your business has predictable, consistent monthly revenue
- You need funding for a specific purpose with a defined payback period (equipment, premises fit-out, acquisition)
- You value the certainty of knowing exactly what you owe each month
- You want to build a credit record for future borrowing
Term loans work less well when:
- Your revenue is seasonal or variable
- You are in the early stages of growth with inconsistent income
- You cannot commit to a fixed monthly repayment with confidence
Revenue-based finance: the flexible model
Revenue-based finance (RBF) provides upfront capital and takes repayment as a fixed percentage of monthly revenue. When revenue is high, repayments are higher. When revenue drops, repayments drop proportionally. There is no fixed monthly amount.
Example:
- Advance: £100,000
- Factor rate: 1.3× (total repayment = £130,000)
- Monthly revenue share: 8%
- If monthly revenue is £80,000 → repayment is £6,400/month → loan repaid in ~20 months
- If monthly revenue drops to £40,000 → repayment is £3,200/month → repayment extends automatically
RBF works well when:
- Your revenue is seasonal, variable, or growing rapidly
- You want repayments that flex with your business performance
- You cannot commit to a fixed monthly payment with certainty
- You have recurring subscription revenue, SaaS revenue, or predictable card income
- Banks and traditional lenders have declined based on inconsistent cash flow
RBF works less well when:
- Your revenue is price-sensitive and taking a percentage of every transaction affects margins
- You want to know exactly when the loan will be repaid
- Your revenue is invoice-based B2B (invoice finance may be more appropriate)
Direct cost comparison
The cost comparison depends on your actual repayment timeline.
| Term loan | Revenue-based finance | |
|---|---|---|
| Repayment structure | Fixed monthly | % of monthly revenue |
| Rate format | APR (%) | Factor rate (×) |
| Total cost known upfront? | Yes | No (depends on revenue) |
| Early repayment | Sometimes penalised | Usually reduces total cost |
| Typical cost on £100k | £10k–£25k over 2–3 years | £20k–£40k at 1.2–1.4× |
| Flexibility | Low | High |
RBF typically costs more in total than a term loan at equivalent rates — but the flexibility premium is the point.
Which should you choose?
Choose a term loan if: your revenue is consistent, predictable, and sufficient to service a fixed monthly repayment. You want cost certainty and are building credit.
Choose revenue-based finance if: your revenue varies month to month, you are in a growth phase with unpredictable income, or a fixed monthly commitment creates cash flow risk.
Consider both: Fundably’s 50+ lender panel includes term loan providers and RBF providers. Apply once and compare offers across both product types.