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Credit & Eligibility

Revenue-Based Financing in Canada: The Complete Guide

Revenue-based financing ties repayment to how much your business makes each month. There is no fixed monthly payment and no rigid term. Credit score plays a much smaller role than it does with a bank loan.

By lendflo Editorial TeamPublished July 22, 2026Updated October 7, 20262 min read
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In this article

Revenue-based financing is one of the most requested products in lendflo's network. It is popular with businesses that have seasonal or uneven income, and with owners whose personal credit does not reflect how the business is doing now. Here is exactly how it works.

How Revenue-Based Financing Actually Works

With a normal loan, you borrow a fixed amount and repay equal monthly installments over a set term. Revenue-based financing works differently. You receive a lump sum up front. Repayment is then collected as an agreed percentage of daily or weekly revenue. This continues until the total is repaid: the principal plus a fixed fee called a factor rate.

Because repayment scales with revenue, a slower week means a smaller payment. There is no missed-payment penalty of the kind a fixed loan installment would trigger.

Revenue-Based Financing vs. a Traditional Term Loan

The two products solve different problems:

  • Term loan: fixed monthly payment, fixed interest rate, fixed term — predictable, but rigid if revenue dips
  • Revenue-based financing: payments flex with revenue, funding is faster, the term is usually shorter, and the effective cost is higher
  • Term loans usually need stronger credit and more time in business. Revenue-based financing looks harder at current cash flow

Who Revenue-Based Financing Is Built For

This product tends to be the strongest fit for:

  • Seasonal businesses (hospitality, tourism, retail, landscaping) where a fixed monthly payment does not match cash flow
  • Businesses with imperfect personal credit but strong, consistent revenue
  • Owners who need capital quickly rather than weeks
  • Businesses covering a short-term gap, such as inventory, payroll or an unexpected repair, rather than a multi-year expansion

What Lenders Look at Instead of Credit Score

Revenue-based lenders in lendflo's network mainly review 3 to 6 months of bank statements. They check four things: the average monthly deposit total, how steady the deposits are, how often payments bounce (NSF), and any debt payments already coming out of the account. A business with steady deposits of $25,000 a month and a 540 credit score is often more fundable this way than the score alone would suggest.

lendflo Editorial Team

Business Financing Specialists

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Common questions

Frequently asked questions

We’re here to simplify your business financing journey, so you can feel confident every step of the way.

They are closely related. A merchant cash advance takes a fixed share of daily card sales. Revenue-based financing can be set against total bank deposits, not just card sales. That makes it usable by businesses that take many e-transfers, cheques or invoice payments.

Most revenue-based lenders in lendflo's network care far more about monthly revenue and bank statements than about personal credit score. Some have no hard minimum score, although a very low score can still affect your rate.

Generally yes. You pay for flexibility and speed. The effective cost is usually higher than a bank term loan's interest rate, and similar to other alternative financing. It suits short-term needs and businesses that value flexible repayment and fast funding more than the lowest cost.

Yes, if the business has steady revenue. Most lenders want to see 3 to 6 months of bank statements with regular deposits, no matter how long the business has been registered.

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Terms explained

What is a business term loan?

A business term loan is a lump sum that you repay with interest over a fixed period, usually in regular monthly payments. It suits planned, one-time investments such as expansion or hiring. Through lendflo, term loans run from $25,000 to $2,000,000, with repayment terms of up to 60 months.

See in the glossary

What is the total cost of borrowing?

The total cost of borrowing is everything you pay on top of the amount you borrow, including interest and fees. The annual percentage rate (APR) expresses that cost as a yearly percentage so offers can be compared. Always compare the total amount repaid, not only the interest rate.

See in the glossary

What is collateral?

Collateral is something of value, such as equipment, property or inventory, that a borrower pledges so the lender can claim it if the loan is not repaid. A loan backed by collateral is called secured; one that is not is called unsecured and relies on revenue and credit instead.

See in the glossary

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