How to use revenue-based finance to bridge post-summer dips

Summer can be a busy time for many businesses. But when the season ends, so can the steady stream of income – and you might be left with bills to pay, stock to replenish, and a cash flow gap that wasn’t there a few months ago. It’s a common challenge, and one that can leave you feeling stretched, particularly when you’re trying to prepare for the next season.

A recent study found that 80% of UK SMEs experienced a cash flow crisis in the last year. Many of these businesses plugged the gaps using personal savings, business loans, credit cards, and even loans from family and friends. But if you’re looking for a more flexible solution, card sales funding – like merchant cash advances – or broader revenue-based finance could be the answer.

Unlike traditional business loans, revenue-based finance doesn’t lock you into fixed monthly repayments. Instead, you repay a percentage of your revenue, so you only pay more when you’re earning more. That means less stress when sales are slow, and more breathing room to focus on growing your business.

In this article, we’ll explain how revenue-based finance works, how it compares to other options like merchant cash advances, and how to decide if it’s the right solution for your business.

Key points:

• Revenue-based finance lets you access funds quickly, with repayments that flex with your sales

• It’s ideal for businesses with seasonal revenue fluctuations, like retail, e-commerce, or hospitality

• Funding Options by Tide can help when optimisation of working capital isn’t enough, offering access to business finance up to £20 million

What is revenue-based finance?

Revenue-based finance is a way to borrow money without the rigid structure of a traditional loan. Instead of paying back a fixed amount every month, you agree to repay a percentage of your future revenue.

For example, if your sales dip after summer, your repayments dip too. And if you have a bumper month, you’ll repay more – but you’ll never pay more than you can afford.

Revenue-based finance is particularly useful if your income or expenses vary throughout the year. So you can use that summer revenue to stock up for the next season, then repay the funding as your sales pick up again. You won’t have to worry about missing payments if a month is slower than expected.

Another big advantage is that you won’t need to provide personal guarantees or business assets as collateral. That means less risk for you, and no chance of losing control of your business if things don’t go to plan. And because repayments are linked to your revenue, lenders are more focused on your sales history than your credit score. So even if your credit isn’t perfect, you could still qualify.

Why might revenue dip after summer?

It’s normal for some businesses to see a drop in revenue after the summer rush. But knowing why it happens can help you plan ahead and decide whether revenue-based finance is the right solution for you.

• Seasonal slowdowns: If your business relies on summer tourists, outdoor events, or holiday shoppers, you’ll likely see a natural drop in sales once the season ends. This typically affects retailers, hospitality businesses, and even some B2B services the most.

• Delayed payments: If you work with other businesses, you might find that your clients take longer to pay invoices after the summer break. And that can leave you short on cash just when you need it most.

• Higher costs: You might need to restock inventory, hire seasonal staff, or invest in marketing to attract customers during the quieter months. All of these can put pressure on your cash flow.

• Consumer spending habits: After spending money on holidays and summer events, many customers tighten their belts in early autumn. That can result in a dip in sales for non-essential products or services.

How can revenue-based finance bridge post-summer dips?

Revenue-based finance is designed to help businesses manage cash flow fluctuations. So if your revenue dips after summer, you won’t be left scrambling to cover costs or sacrificing your growth plans.

Here’s how it helps:

• Fast access to funds: You can often get approved and receive the money within 24-48 hours. This allows you to act quickly to cover costs like payroll, inventory, or marketing without waiting for a business loan.

• Repayments that match your revenue: If your sales drop after summer, your repayments will drop too. You’ll only pay more when your revenue picks up, so there’s no strain on your cash flow during quieter months.

• No loss of equity: Unlike venture capital or angel investment, you won’t have to give up a share of your business and you’ll stay in full control.

• Flexible use of funds: You can use the money for anything that helps your business grow, such as buying stock, launching a new product, or covering day-to-day expenses.

As an example, imagine you run an e-commerce store. You know that sales will dip after summer, but you also know that Black Friday and the Christmas season are just around the corner. With revenue-based finance, you could use the funding to stock up on inventory in advance, then repay the loan as your sales increase in November and December.

Because the funding’s tied to your revenue, you won’t have to worry about fixed monthly payments eating into your profits. And that peace of mind can make all the difference when you’re trying to navigate a tricky few months.

How to tell if revenue-based finance is right for your business

Revenue-based finance isn’t for everyone, but it could be a great fit if your business ticks a few key boxes.

First, you’ll need to have a steady stream of revenue – even if it fluctuates throughout the year. Lenders typically look for businesses with at least £10,000 in monthly sales, but some may consider lower amounts if your revenue is consistent.

You’ll also want to think about how much you’re comfortable repaying. Most providers charge a flat fee or a multiple of the loan (usually between 1.2x and 3x the amount you borrow). So if you take out £50,000, you might repay between £60,000 and £150,000 in total, depending on the terms. The good news is that you’ll know the total cost upfront, so there shouldn’t be any nasty surprises down the line.

Another thing to consider is how quickly you expect your revenue to recover. If you’re confident that your sales will bounce back within a few months, revenue-based finance could be an effective way to bridge the gap. But if you’re facing a longer-term downturn, you might want to explore other options, like working capital finance or asset finance.

It’s also worth speaking with a financial advisor to make sure this type of funding aligns with your broader business goals. They can help you compare the costs and benefits, and decide whether revenue-based finance is the most suitable choice for your situation.

Alternatives to revenue-based finance

Revenue-based finance is just one way to manage post-summer cash flow dips. But depending on your business, you might want to consider some other alternatives.

• Bank loans: If you have a strong credit history and don’t mind fixed repayments, a traditional bank loan could offer lower interest rates. But the application process can be slow, and you’ll usually need to provide collateral.

• Merchant cash advances: If your business takes a lot of card payments, a merchant cash advance could be a good fit. Like revenue-based finance, repayments are tied to your sales – but they’re specifically linked to your card transactions.

• Invoice finance: If late-paying customers are the issue, invoice finance lets you unlock cash from unpaid invoices. You’ll get a percentage of the invoice value upfront, then repay the funding (plus fees) when your customer pays you.

• Asset finance: If you need to buy equipment or vehicles, asset finance lets you spread the cost over time. The asset itself acts as security, so you won’t need to put up additional collateral.

• Overdrafts or credit lines: These can provide a short-term buffer for unexpected costs. But they often come with higher interest rates, so they’re best used for emergencies rather than long-term funding.

Each of these options has its pros and cons, so it’s worth weighing them up carefully. The right choice will depend on your business’s unique needs and how quickly you need the funds.

Find business finance with Funding Options by Tide

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Checking if you’re eligible is free, only takes a few minutes, and while a full application would impact your personal or business credit score, checking eligibility won’t. Just submit your details via the link below to find out if you could be eligible to borrow up to £20 million.

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FAQs

What’s the minimum revenue required for revenue-based finance?

Most UK providers look for businesses with at least £10,000 in monthly revenue, but some may accept less if your sales are consistent. You’ll need to show that you have a steady income stream, even if it varies throughout the year.

How quickly can I access funds?

Once you’re approved, you could receive the money within 24-48 hours. That makes revenue-based finance one of the fastest ways to get funding when you need it urgently.

Do I need a perfect credit score?

Not necessarily. Revenue-based finance providers focus more on your revenue history than your credit score. So even if your credit isn’t perfect, you could still qualify – especially if you have strong sales.

How much will I repay in total?

The total repayment depends on the terms of your agreement. Typically, you’ll repay between 1.2x and 3x the amount you borrow. For example, if you take out £50,000, you might repay between £60,000 and £150,000. The exact amount will depend on your revenue and the lender’s fees.

What happens if my revenue drops unexpectedly?

If your revenue drops, your repayments will drop too. Some providers even pause repayments if your revenue falls to zero, but you’ll need to check the terms of your agreement.

Can I repay early to save on costs?

Some providers allow early repayment without penalties, while others may charge a fee. Always clarify this upfront so you know where you stand.

Will revenue-based finance affect my credit score?

Revenue-based finance isn’t usually reported to credit agencies, so it won’t impact your score. But defaulting on the agreement could affect your ability to get funding in the future.

Can I use revenue-based finance if I already have a bank loan?

You should be able to, but you’ll need to make sure your cash flow can handle both repayments. Some lenders may ask for proof that you can afford the additional commitment.

Is revenue-based finance suitable for startups?

It can be, but you’ll typically need at least six months of trading history and consistent revenue. If you’re a pre-revenue startup, you might need to look at other options, like grants or equity funding.

What’s the difference between revenue-based finance and a merchant cash advance?

Revenue-based finance works with any type of revenue, while a merchant cash advance is specifically tied to your card sales. Both offer flexible repayments, but the right choice depends on how your business earns income.

How do I apply for revenue-based finance?

The process is usually straightforward. You’ll need to provide a few months of bank statements and proof of revenue. Most providers don’t require a business plan or pitch deck, so you can apply quickly and easily.

Can I use revenue-based finance for any business purpose?

Yes – whether you need to buy stock, hire staff, or cover day-to-day expenses, the funds are yours to use as you see fit.

Are there UK-based revenue-based finance providers?

Absolutely. Funding Options by Tide works with over 120 UK lenders, including revenue-based finance specialists. See your options here.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.