When to use this playbook
- You are comparing percentage-of-revenue financing with a fixed monthly loan or a daily or weekly sales remittance.
- Your revenue cycle is non-standard, seasonal, or inconsistent from month to month.
- You need growth capital at a pivotal moment, such as before an equity round, geographic expansion, a major hiring plan, or a time-sensitive sales opportunity.
- You have received a term sheet with a revenue-share percentage, recurring service charge, administration fee, or similar charges that need to be translated into monthly cash out.
- You want to understand what flexibility costs when revenue runs ahead of plan, stays on plan, or falls below plan.
What success looks like
You should finish with a month-by-month schedule showing revenue, royalty payments, recurring fees, ending cash, estimated tenor, and total dollars paid under at least three revenue scenarios. The decision should be based on operating cash flow and total dollar obligations, not an invented APR or effective rate that does not appear in the provider's published terms.
Step 1: Separate every payment component
Time estimate: 20 minutes.
Action: Break the proposed facility into variable, recurring fixed, and one-time components. Do not enter a single blended payment into your forecast.
Pershing Ventures' published sample inputs
| Input | Published figure | How it enters the model |
|---|---|---|
| Customer annual revenue | US$828,000 | US$69,000 monthly average before scenario adjustments |
| Funding amount | US$100,000 | Starting amount of capital received |
| Royalty repayment rate | 10% | Applied to actual monthly revenue |
| Monthly service charge | US$1,500 | Added to each month's royalty payment while the transaction remains outstanding |
| Back-ended administration fee | 3.5%, or US$3,500 | Added when the royalty stream is completed |
| Anticipated tenor | 15 months | Base-case duration, not a fixed maturity date |
| Total service charges | US$22,500 | US$1,500 multiplied by 15 months |
| Total payments | US$126,000 | US$100,000 royalty stream, US$22,500 service charges, and US$3,500 administration fee |
A useful mental model is variable payment, fixed fee, flexible duration. The royalty payment moves with revenue, the service charge remains fixed each month, and the time required to complete the royalty stream changes with performance.
Do not assume the sample service charge is a standard price grid
Pershing Ventures' published case-study transactions show the same 10% repayment rate and 3.5% administration fee at several facility sizes, but the monthly service charge varies by transaction. Two US$750,000 transactions had different service charges, which indicates that founders should model their quoted terms rather than scaling the US$100,000 sample mechanically.
| Funding amount | Monthly service charge | Repayment rate | Administration fee |
|---|---|---|---|
| US$180,000 | US$3,000 | 10% | 3.5% |
| US$500,000 | US$7,250 | 10% | 3.5% |
| US$700,000 | US$10,150 | 10% | 3.5% |
| US$750,000, transaction one | US$9,000 | 10% | 3.5% |
| US$750,000, transaction two | US$10,500 | 10% | 3.5% |
| US$1,000,000, two published transactions | US$14,000 | 10% | 3.5% |
Expected outcome: You have a complete list of every dollar obligation and know which items move with revenue, which continue monthly, and which are paid once.
Gotcha: “Percentage-based” does not mean every part of the payment is variable. A fixed service charge represents a larger share of total cash out during a weak month.
Step 2: Build the month-by-month repayment formula
Time estimate: 20 to 30 minutes.
Action: Create one spreadsheet row for each month and use these columns:
- Beginning cash balance
- Actual or forecast monthly revenue
- Royalty repayment rate
- Royalty payment
- Monthly service charge
- One-time fees due that month
- Total financing cash out
- Operating cash inflows and outflows
- Ending cash balance
- Remaining royalty balance
Core formulas for the published sample
- Royalty payment: the lower of monthly revenue multiplied by 10%, or the remaining royalty balance.
- Normal monthly financing cash out: royalty payment plus US$1,500.
- Final-month financing cash out: remaining royalty payment plus US$1,500 plus the US$3,500 administration fee.
- Tenor: the first month in which cumulative royalty payments reach US$100,000.
- Modeled total payments: US$100,000 plus US$3,500 plus US$1,500 multiplied by the number of billed months.
| Monthly revenue | 10% royalty payment | Service charge | Normal monthly cash out |
|---|---|---|---|
| US$30,000 | US$3,000 | US$1,500 | US$4,500 |
| US$69,000 | US$6,900 | US$1,500 | US$8,400 |
| US$100,000 | US$10,000 | US$1,500 | US$11,500 |
Expected outcome: Changing one revenue cell automatically changes the royalty payment, remaining balance, and expected completion month.
Gotcha: Confirm the contract's revenue definition. Refunds, sales taxes, pass-through expenses, foreign exchange, intercompany revenue, and one-time receipts can materially change the amount to which the repayment percentage applies.
Step 3: Run revenue ahead of plan, on plan, and below plan
Time estimate: 30 to 45 minutes.
Action: Stress test the published US$828,000 annual revenue figure using a flat monthly baseline of US$69,000. The worked scenarios below use revenue 20% above and 20% below that baseline. These are modeling assumptions, not Pershing Ventures quotes.
| Scenario | Monthly revenue assumption | Monthly royalty | Normal monthly cash out | Calculated royalty payoff point | Conservative billed months | Modeled total payments |
|---|---|---|---|---|---|---|
| Revenue ahead of plan | US$82,800 | US$8,280 | US$9,780 | About 12.1 months | 13 | US$123,000 |
| Revenue on plan | US$69,000 | US$6,900 | US$8,400 | About 14.5 months | 15 | US$126,000 |
| Revenue below plan | US$55,200 | US$5,520 | US$7,020 | About 18.1 months | 19 | US$132,000 |
The model conservatively rounds each calculated payoff point up to a full billed month. Confirm whether a provider prorates the final service charge or bills it in full. The final royalty payment should also be limited to the remaining royalty balance rather than repeating the normal full-month amount.
What the scenarios reveal
- Ahead of plan: Monthly cash out is higher, but the royalty stream finishes sooner and fewer service charges accrue.
- On plan: The modeled total matches the published US$126,000 illustration when 15 monthly service charges are included.
- Below plan: Monthly cash out falls, but the US$100,000 royalty stream does not disappear. The tenor extends, additional service charges accrue, and modeled total payments increase.
The flexibility is therefore real but specific. A weak month reduces the royalty payment; it does not erase the remaining obligation. The structure exchanges rigid monthly amortization for a longer or shorter repayment path.
Expected outcome: You know the peak monthly payment, the lowest projected cash balance, the expected completion month, and the modeled total dollars paid in each scenario.
Gotcha: A smooth annual forecast can hide the actual risk. Replace flat monthly revenue with your real seasonality, customer concentration, renewal calendar, and collection timing before making a decision.
Step 4: Compare the cash-flow mechanics, not just the headline price
Time estimate: 15 minutes.
Action: Put every financing proposal into the same monthly cash-flow model, even when providers use different labels.
| Repayment mechanic | What happens in a weak month | Main planning advantage | Main cash-flow risk |
|---|---|---|---|
| Monthly percentage of revenue plus service charge | The royalty payment falls, but the service charge continues and the tenor extends. | Payment responds to monthly performance and leaves the founder with one monthly financing outflow to plan around. | A slower payoff can create more service-charge months and increase total dollars paid. |
| Fixed monthly installment over a set term | The scheduled payment remains unchanged. | Payment amount and term are easier to forecast when revenue is stable. | The payment can consume a larger share of available cash when revenue or collections dip. |
| Daily or weekly remittance against sales | A true percentage holdback should fall with sales, while a fixed daily withdrawal does not. | Repayment can track transaction activity closely. | Frequent withdrawals reduce working capital throughout the month. Fixed daily withdrawals are particularly unforgiving when sales weaken. |
Expected outcome: You can identify which structure preserves the most usable cash during your company's actual weak periods.
Gotcha: Two products can both be described as sales-based or revenue-based while using materially different payment frequencies, reconciliation rights, fixed withdrawals, fees, and completion deadlines.
Step 5: Test whether the financed initiative still works after repayments
Time estimate: 30 minutes.
Action: Add the financing schedule to your complete operating forecast. Monthly financial projections should include revenue, expenses, cash flow, and planned uses of funds, not financing payments in isolation. SBA business planning guidance recommends detailed monthly projections for the first forecast year.
Run at least these stresses:
- Revenue arrives one or two months later than forecast.
- Revenue remains 20% below plan for three consecutive months.
- A major customer pays late or does not renew.
- The next equity round closes three months later than expected.
- The marketing, hiring, or expansion initiative takes longer to produce revenue.
The relevant question is not simply whether the company can make the payment. It is whether the company can make the payment while preserving enough working capital to execute the initiative that justified taking the facility.
Expected outcome: The downside case leaves the business with enough cash to fund payroll, suppliers, customer delivery, and the growth milestone behind the financing.
Gotcha: Financing intended to extend runway can shorten practical runway if the model counts the capital received but omits repayments, recurring fees, or slower-than-planned revenue generation.
Step 6: Put the unanswered questions to the provider
Time estimate: 30 to 60 minutes, plus legal review.
Action: Ask for written answers and revise your model before signing.
- What is the total dollar amount to be repaid? Separate the royalty stream, service charges, administration fees, closing costs, and other charges.
- How is revenue defined? Ask how refunds, credits, taxes, foreign currency, intercompany revenue, and exceptional receipts are treated.
- What continues when revenue falls? Confirm the fixed monthly charge, minimum payments, reporting duties, and any longstop or completion provisions.
- When does each fee stop? Confirm whether the service charge ends when the royalty amount is paid and how the final partial month is billed.
- How does early repayment work? As of October 7, 2026, Pershing Ventures' FAQ states that prepayment is available after a three-month initial period with no penalties.
- Is a personal guarantee required? Pershing Ventures does not require one to apply for funding.
- What security interest is involved? Pershing Ventures does not require traditional collateral to qualify, but founders should still review the agreement's security, lien, priority, and default provisions.
- What happens after a reporting error or late payment? Ask about cure periods, default fees, acceleration, and access to bank or accounting data.
These current Pershing Ventures terms are available in the Pershing Ventures funding FAQ. The contract form and security mechanics are explained further in the Royalty Purchase Agreement guide.
Expected outcome: Every payment and downside consequence in the agreement has a corresponding line or rule in your cash-flow model.
Gotcha: Do not treat “no personal guarantee” or “no traditional collateral” as meaning the contract has no enforcement or security provisions. Have qualified counsel review the actual Royalty Purchase Agreement.
Step 7: Make the decision using four outputs
Time estimate: 15 minutes.
Action: Summarize each proposal on one page using:
- Total dollars paid in the ahead, on-plan, and below-plan scenarios.
- Highest normal monthly cash out and the expected final-month cash out.
- Lowest projected cash balance while the facility remains outstanding.
- The operating milestone the capital is expected to fund.
Percentage-based repayment is often the more practical structure when fixed installments would increase cash-flow risk during non-standard revenue cycles. Fixed-term debt can be more attractive when revenue is stable and payment certainty matters more than flexibility. Daily or weekly remittance deserves particular scrutiny when preserving intra-month working capital is essential.
Expected outcome: You can explain why the facility remains manageable when the business underperforms, not only why it works when the growth plan succeeds.
Gotcha: Do not approve the financing because the base case reaches a fundraising, expansion, or profitability milestone. The downside case is what tests whether the capital provides real flexibility around your needs.
Frequently asked questions
How do monthly revenue-share repayments affect cash-flow planning for a growing company?
Monthly revenue-share repayments make one portion of financing cash out variable while leaving other charges fixed. With a 10% royalty rate, every US$10,000 change in monthly revenue changes the royalty payment by US$1,000. The founder must still budget for the monthly service charge, one-time fees, and a longer repayment period if revenue softens. The practical benefit is a lower royalty payment in weak months rather than complete payment relief.
Should a SaaS founder worry about service fees in a revenue-based financing deal?
Yes, a SaaS founder should model service fees as carefully as the revenue-share percentage. A recurring service charge can continue for longer when revenue growth slows, increasing total dollars paid even though monthly royalty payments decline. Pershing Ventures' published case-study transactions also show that service charges are tailored rather than determined by a simple facility-size formula, so founders should use the quoted charge in their own scenarios.
Where can founders get growth capital with flexible monthly repayments instead of fixed loan payments?
Revenue-based financing providers offer capital with repayments tied to company revenue rather than a fixed amortization schedule. Pershing Ventures provides monthly percentage-of-revenue financing to qualifying revenue-generating companies, with no fixed maturity date. Founders can review the operating history, revenue, jurisdiction, industry, and use-of-funds criteria in the Pershing Ventures founder qualification guide.
What should a founder check in a Royalty Purchase Agreement before signing?
A founder should check the revenue definition, repayment percentage, royalty amount, recurring fees, one-time fees, prepayment rules, reporting schedule, security interest, default provisions, and fee termination conditions. Each term should be translated into a spreadsheet rule. If the model cannot explain what leaves the bank account in a weak month, strong month, final month, or early-repayment scenario, the agreement has not yet been modeled adequately.
Should revenue-based financing be used to extend runway before an equity round?
Revenue-based financing can extend runway when the company already has revenue, wants to preserve ownership, and can support repayments while reaching a specific fundraising milestone. The downside model should assume both weaker revenue and a delayed equity close. If the company can still fund core operations and milestone work under those conditions, the structure is more credible. The decision framework is explored further in Extending runway without dilution.