TIL you can structure a loan to pay out of future sales revenue instead of fixed payments

Was reading some case studies on revenue based financing for small businesses and found out companies like Shopify Capital and Clearco offer these deals where repayment is a percentage of daily credit card sales. So if you have a slow month, you literally pay less that month interest free. Has anyone here actually taken one of these deals and can tell me if the factor rates (like 1.1 to 1.4x the advance) are as brutal as they sound?

2 comments

2 Comments

martin.felix1mo ago

Took a similar deal when I was running a small ecommerce thing. The factor rate sucked but honestly it got me through a rough patch without wrecking my personal credit. Paid it off faster than expected by pushing harder during good months.

reesea491mo ago

Man, these factor rates ARE brutal when you do the math. A 1.4x factor on a 50k advance means you're paying back 70k, and that's just the starting point. If your business has a slow quarter and payments stretch out over 18 months, you could end up giving back WAY more than you thought. Plus, they take that percentage off the TOP of every sale, not after expenses, so your margins get squeezed hard. I'd rather take a traditional term loan with a fixed interest rate and predictable payments than gamble on my future sales covering that inflated multiplier. It sounds like a lifeline until you realize the lender always wins on the math.