Launch Capital
May 19, 2026
The short answer: Revenue-based financing gives a company capital in exchange for a percentage of future revenue until an agreed amount is repaid. It can suit businesses with steady, recurring income that want to grow without giving up equity, but it can strain cash flow if margins are thin.
Instead of fixed monthly loan payments, you pay a share of your revenue. When sales are strong, you repay faster. When they slow, payments shrink. The total you repay is usually agreed at the start as a multiple of the amount advanced, so there is typically no ownership stake involved.
Providers look closely at the quality of your revenue. Predictable, recurring income, healthy gross margins and a history of consistent sales make a company more attractive. Many Canadian software and subscription businesses fit this profile.
Founders often choose this route for a few reasons.
The overall cost can be higher than a conventional loan once you account for the agreed repayment multiple. A percentage of revenue, not profit, leaves your account each month, which can squeeze companies with thin margins. If growth is lumpy or highly seasonal, repayments can become hard to forecast.
It also does not replace equity if you are still building the product. Funding of this kind rewards businesses that already know how to turn spending into revenue.
Providers generally want to see recurring or repeat revenue, reasonable margins, a track record of billing and reliable financial reporting. Early companies without a consistent sales history often struggle to qualify. Check how the provider defines revenue, what happens if you want to repay early and whether there are minimum payments or fees.
Read the agreement carefully, and have a qualified lawyer and accountant review it before you commit.
Compare revenue-based financing with venture debt, equity and growth capital. Each has a different cost, level of control and risk. The best choice usually depends on your margins, predictability and plans.
Before you apply, model your revenue under both good and poor scenarios and check that you could still make the payments in the poor case. If the answer is uncertain, consider a smaller advance or a different source of capital. Also ask whether the spending you plan will generate revenue quickly enough to cover the cost of the funding.
Launch Capital is a Toronto venture capital firm and family office that provides growth capital to Canadian technology companies. We are operators who have built and exited companies ourselves. If you are building something real, send us your pitch.
