Revenue-Based Financing vs Equity vs Venture Debt: Which Capital Source When?
Collated by Paul Jung, CFA
Curated by Rubric Financial
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The Four Main Capital Sources
- EQUITY (VC, angel, family + friends): cash for ownership %. No repayment obligation but maximum dilution. Best for companies with high-growth + winner-take-all dynamics.
- VENTURE DEBT: term loan from specialty lenders, alongside or after equity rounds. Interest + principal repayment + warrants. Best for capital-efficient, predictable growth.
- REVENUE-BASED FINANCING (RBF): cash advance against future revenue. Repaid as % of monthly revenue until a cap is hit. No dilution but limits flexibility.
- BOOTSTRAPPING + LINES OF CREDIT: minimal external capital. Slower growth but founders retain ownership. Best for high-margin businesses with low capital intensity.
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