How to crush every metric that matters for revenue-based financing

Revenue-based financing (RBF) is reshaping how businesses raise capital, offering a flexible alternative to traditional loans and venture capital. To maximize this funding option, founders need a solid grasp of the key metrics that drive RBF success.

Understanding these metrics enhances financial health and strengthens a company’s ability to attract and secure funding.

We've broken down seven metrics you need to know, explaining how they work and how you can make them work for you.

Key Takeaways

• Revenue-based financing (RBF) is a popular alternative funding option for early-stage founders. RBF is ideal for subscription businesses and businesses with consistent recurring revenue.
• Revenue-based lenders will consider your startup's revenue, profitability, unit economics, growth, and retention when making a lending decision.
• The most common mistakes founders make when seeking RBF include underestimating their cash flow needs, neglecting to build detailed and realistic forecasts, and ignoring the impact of repayment terms.
• Revenue-based lenders love to see detailed financial models that clearly show your historical performance in line with your projected growth. 

Table of contents

• Why revenue-based financing is taking off
• Key metrics for revenue-based financing success
• How to secure revenue-based financing
• How to make smarter decisions about raising capital
• Prepare for success with revenue-based financing

Why revenue-based financing is taking off

Businesses across various industries are increasingly turning to revenue-based financing. Here’s why this funding model is becoming a preferred choice:

Traditional loans vs. RBF

Unlike conventional loans with fixed repayment schedules, RBF adjusts to a company’s revenue fluctuations. This means businesses repay more when revenue is strong and less during slower periods, reducing financial strain.

A venture capital alternative

Many businesses seek funding without sacrificing equity or control. RBF enables companies to secure the capital they need while retaining ownership, making it an attractive option for founders who want to maintain strategic direction.

Best-fit industries

RBF is particularly beneficial for subscription-based businesses, e-commerce brands, and SaaS companies. These industries thrive on recurring revenue models, making them ideal candidates for revenue-based financing.

Bridge funding solution

Businesses often experience cash flow gaps while waiting for larger funding rounds or revenue spikes. RBF serves as a short-term funding solution, providing the necessary capital to maintain operations and growth momentum.

Key metrics for revenue-based financing success

Here are 7 metrics revenue-based lenders will want to see and analyze when they decide whether or not to lend you money—spanning revenue, margin, unit economics, growth, and retention.

Monthly recurring revenue (MRR) and annual recurring revenue (ARR)

What they measure

MRR represents predictable revenue from subscriptions or recurring contracts each month. ARR is the annualized version of MRR and helps project long-term financial health.

Why they matter

Lenders use these metrics to evaluate revenue consistency. Companies with stable or growing MRR/ARR are more likely to secure favorable financing terms.

How to calculate

MRR = Sum of all monthly subscription revenue
ARR = MRR × 12

Businesses can find this data in subscription management platforms, accounting software, or financial dashboards.

Ways to improve

Adjust pricing strategies, reduce churn, and introduce upsell opportunities to grow MRR and ARR.

Gross margin and profitability

What it measures

Gross margin is the percentage of revenue remaining after direct costs (COGS) are deducted. It indicates financial efficiency in product or service delivery.

Why it matters

A strong gross margin ensures that a company can meet financing obligations while covering operational expenses. Higher margins signal lower financial risk for lenders.

How to calculate

Gross Margin (%) = ((Revenue - COGS) / Revenue) × 100

Revenue and COGS data can be accessed through financial statements and accounting software.

Ways to improve

Negotiating better supplier rates, reducing unnecessary expenses, and optimizing pricing structures can increase gross margin.

Customer acquisition cost (CAC) and customer lifetime value (LTV)

What they measure

CAC calculates the cost of acquiring a new customer, including marketing and sales expenses. LTV represents the total revenue generated by a customer over their entire relationship with the business.

Why they matter

A strong LTV-to-CAC ratio indicates sustainable growth. If acquiring a customer costs more than it generates in revenue, profitability becomes unsustainable, which concerns lenders.

How to calculate

CAC = Total Sales & Marketing Costs ÷ New Customers Acquired
LTV = Average Revenue per Customer × Customer Lifespan

CRM systems, financial reports, and analytics dashboards track these metrics.

Ways to improve

Lowering CAC through targeted marketing and increasing LTV via customer retention strategies enhances funding eligibility.

Revenue growth rate and stability

What it measures

The percentage increase in revenue over a specific time frame.

Why it matters

Lenders favor businesses with stable or accelerating growth because they demonstrate financial health and repayment ability.

How to calculate

Revenue Growth Rate (%) = ((Current Period Revenue - Previous Period Revenue) ÷ Previous Period Revenue) × 100

Businesses track this using financial statements and accounting software.

Ways to improve

Expanding revenue streams, improving customer retention, and securing long-term contracts help maintain consistent growth.

Churn rate and customer retention

What it measures

Churn rate tracks the percentage of customers who stop using a service within a given period. Retention rate reflects the percentage of customers who continue using the service over time.

Why it matters

High churn signals revenue instability, which raises lender concerns. Strong retention reassures lenders that revenue remains predictable.

How to calculate

Churn Rate (%) = (Lost Customers ÷ Total Customers at Start of Period) × 100

Businesses monitor this in customer analytics tools and subscription management software.

Ways to improve

Enhancing customer experience, offering loyalty programs, and addressing pain points reduce churn and increase retention.

How to use these metrics to secure revenue-based financing

Making a strong case for RBF investors starts with a well-structured financial model. Here’s how to fine-tune your financial data to enhance your funding opportunities:

Creating a financial model that attracts RBF investors

A strong financial model demonstrates how a company generates revenue, scales operations, and manages expenses. Investors look for clear projections that outline predictable revenue streams and sustainable growth.

Common mistakes businesses make when preparing for RBF

• Underestimating cash flow needs – Businesses should account for variable revenue and operating costs.
• Lack of detailed forecasting – Inaccurate revenue projections can deter investors.
• Ignoring repayment impact – Understanding how RBF repayments affect cash flow is critical to long-term success.

Leveraging forecasting tools like Forecastr to optimize your financial data

A financial model provides powerful tools that help businesses build accurate forecasts. By tracking revenue trends, expenses, and cash flow projections, businesses can make data-driven decisions and present a compelling case to investors.

How to make smarter decisions about raising capital

Your financial model plays a crucial role in navigating funding opportunities and ensuring you choose the best financing solutions.

A well-structured financial model enables businesses to evaluate different funding options, predict repayment scenarios, and plan for future growth.

• Revenue assumptions: Base projections on historical data and market trends.
• Expense forecasting: Accurately predict costs to ensure profitability.
• Cash flow management: Ensure sustainable operations while accommodating repayment schedules.

Essential components of a financial model for RBF success

A well-designed financial model includes key metrics and key performance indicators (KPIs) such as customer acquisition cost, lifetime value, monthly recurring revenue, and churn rate. These insights help businesses present a strong case to RBF investors.

With a detailed model, businesses can negotiate better RBF terms, ensuring repayment structures align with revenue expectations and long-term financial stability.

Prepare for success with revenue-based financing

If you're looking for alternative funding options, revenue-based financing might be a great fit to support your business growth.

You'll want a strong financial model that covers all the metrics lenders will want to understand. If you do that, and avoid the pitfalls we discussed above, you'll be able to secure the best funding terms.

When you're ready to unlock growth capital through revenue-based financing, reach out to Intrepid Finance for fast, flexible funding solutions. And if you don't already have a working financial model, check out Forecastr before you do anything else.