Revenue-based financing gives a Tooele, UT restaurant or retailer a lump sum that is paid back as a fixed share of revenue, so payments rise in strong weeks and shrink in slower ones until an agreed total is reached. A merchant cash advance is different: it is not a loan but a purchase of future card sales. Each provider sets its own share and total.
Revenue-based financing takes a fixed share of revenue until an agreed total is paid, so payments move with sales. A merchant cash advance buys future card sales instead and is not a loan. Fixtures and coolers fit a fixed schedule better; short cash gaps fit a revenue share.
What Is Revenue Based Financing? POS Systems, Display Fixtures and the Answer for Retailers
What is revenue based financing? It is funding paid back from a fixed percentage of the business's revenue until an agreed total has been paid. There is no fixed monthly payment: a strong week sends more, a slow week sends less. The contract states the share, the total, and whether the arrangement is written as a loan or as a purchase of future revenue.
For a retailer, the answer depends on what the money buys. A new POS system and display fixtures will stay in the store for years, and they can sit on a line of credit or an equipment note with a fixed schedule. Revenue-based financing fits better when the money should come back out of sales within weeks, such as stock for a large order, and when those sales arrive in uneven weeks.
A store with four employees feels an uneven week in the next payroll, and 40.6% of the 133 Retail Trade establishments that County Business Patterns lists in Tooele County, UT for 2023 had fewer than five employees.
Revenue Based Financing vs. MCA for Slow-Week Payroll: A Tooele, UT Restaurant Example
Revenue based financing vs. MCA comes down to what is bought and how it is collected. Revenue-based financing takes a share of total revenue, cash and card alike. A merchant cash advance works another way, and it is not a loan at all: a provider buys a set amount of the restaurant's future card sales at a discount and collects it as a share of each day's card receipts until that amount is in.
Illustration only, invented figures: a kitchen takes $25,000 to carry payroll through a run of slower weeks. Under an invented revenue-based contract, 8% of weekly revenue goes to the funder until $31,000 has been paid. Under an invented cash advance, the provider buys $32,500 of future card sales for the same $25,000 and collects 11% of each day's card receipts.
In a week with $16,000 of revenue, $13,600 of it on cards, the revenue share sends $1,280 and the card-sales collection takes $1,496. In a slower week of $11,000, $9,350 on cards, those fall to $880 and $1,028.50. At the stronger week's pace, the revenue share is finished in 25 weeks and the card-sales collection in 22 (our arithmetic); the cash advance costs $1,500 more in total, $7,500 against $6,000.
Payroll in a staffed dining room does not shrink with a slow week, and the county's full-service kitchens are staffed: of 29 establishments listed under Full-Service Restaurants (NAICS 722511) for Tooele County, UT in 2023, 6 had fewer than five employees (County Business Patterns).
Revenue Based Financing Pros and Cons When a Tooele, UT Retail Shop Needs Shelving
Revenue based financing pros and cons look different for shelving than for the stock that goes on it.
- Pro: payments follow revenue, so an uneven week never meets a fixed payment
- Pro: no piece of equipment has to be appraised, and no schedule is tied to a purchase date
- Con: the total can be fixed up front, so paying sooner does not shrink it unless the contract says otherwise
- Con: a share comes out of every sale, including the sales that pay rent and restock the floor
- Con for shelving: fixtures last for years, and a short revenue-share schedule asks a few months of sales to pay for them
Illustration only, invented figures: $9,600 of gondola shelving. Through a revenue-share contract at 9% of a $30,000 month of sales, the store sends $2,700 a month toward an $11,500 total, finishing in the fifth month. On a 24-month note at a 10% annual rate, the same shelving costs $442.99 a month and $10,631.76 in all, $868.24 less than the revenue-share total.
Shelving that will stand for years matches a fixed schedule: an equipment note or working capital on a term the store can plan around. Revenue-based financing makes more sense for the stock on that shelving, when the order should sell through within weeks.
A Walk-In Cooler Replacement: Where It Shows Up in a Restaurant's Funding File
A walk-in cooler that fails takes the food inside it along, and the replacement cannot wait for a better week. In a funding file, the cooler shows up as equipment: a quote with the box size, the condensing unit, installation and a delivery date. The lost food and the days closed show up on the cash side.
Those two sides fit different products. The cooler itself suits a fixed term that matches its working life. The cash side can suit a revenue share, since card sales pick back up after the reopening and the payments follow them, or a line drawn and paid down in a few weeks.
Counter-service kitchens face the same choice: County Business Patterns lists 41 establishments under Limited-Service Restaurants (NAICS 722513) in Tooele County, UT for 2023. More county figures are on the restaurant page and the retail page, and city figures on the Tooele, UT page.
By Laurelmont Commercial Capital · Updated
