How Revenue Based Lending Repayments Work (Factor Rate Explained)
Gary Grimes
CEO & Founder | Head Of Revenue at Simplí Finance
Published:
One of the first questions Irish business owners ask about revenue based lending is how repayments actually work. The answer is straightforward once you understand the mechanics, but the terminology can be confusing if you have only dealt with bank loans before.
This guide explains how repayments are calculated, what a factor rate is, and what you should ask before you agree to any offer. At Simpli Finance, we make sure every client understands exactly what they are signing up for before a penny changes hands.
What Is a Factor Rate?
A factor rate is the way the total cost of a revenue based advance is expressed. Instead of an annual percentage rate, you multiply the amount you borrow by the factor rate to get the total amount you repay.
For example, if you borrow €100,000 at a factor rate of 1.25, you repay €125,000 in total. The €25,000 is the cost of the finance. There is no compounding interest. The total you repay is fixed from the start, regardless of how long it takes.
Applied once at the start — the rate does not compound. You always know the exact total you will repay before you sign.
How the Repayment Percentage Is Set
Once your advance is agreed, the lender sets a repayment percentage. This is the share of your daily or weekly revenue that is collected as repayment. Typical percentages range from around 5% to 20% of daily card sales, depending on your revenue and the size of the advance.
A higher percentage means you repay faster. A lower percentage gives you more breathing room each week. The right balance is worked out based on your trading volume and what your cash flow can comfortably support.
Card Repayments vs Revenue-Based Repayments
For businesses that take most of their income through card terminals, repayments are typically collected directly from card transactions each day. This is the most common arrangement and it is seamless as it happens automatically through your terminal.
For businesses with mixed payment methods, including cash, bank transfers, and invoices, repayments are collected weekly based on total reported revenue. You share your revenue figures each week and the repayment is calculated from there.
What Happens During a Slow Month?
This is where revenue based lending is fundamentally different to a bank loan. If your sales drop, your repayment drops with them. There is no fixed monthly amount that you owe regardless of what your business brings in.
A quieter January means a smaller daily deduction. A strong December means you repay more in that period. The structure is designed around the reality of how Irish businesses actually trade, not an idealised steady income scenario.
Does the Total Cost Change Based on How Long It Takes to Repay?
No. Because the total repayable amount is calculated as a fixed multiple of what you borrowed, it does not change based on how quickly you repay. If your business has a strong run and repays faster than expected, the total cost stays the same.
This is one of the most important differences from a business loan with compound interest, where repaying faster saves you money. With revenue based lending, the factor rate locks in the total cost upfront.
What to Ask Before You Agree to an Offer
Always ask for the total repayable amount in euros, not just the factor rate. Ask what percentage of your revenue will be collected each day or week. Ask whether the percentage can be adjusted if your trading changes significantly.
At Simpli Finance, we walk every client through these figures before they sign anything. You should never agree to a revenue based advance without understanding the total cost and the daily impact on your cash flow.
FAQ: Revenue Based Lending Repayments in Ireland
What is a typical factor rate in Ireland?
Factor rates vary by lender and by application profile. We do not publish specific rates as they are set based on your individual revenue and risk profile. We give you your rate clearly before you agree to anything.
Can the repayment percentage change during the term?
In most cases the percentage is fixed for the duration of the advance. If your trading changes dramatically, speak to your lender. Some providers can discuss adjustments in exceptional circumstances.
Is there a fixed end date for repayment?
No. Revenue based lending does not have a fixed term. Repayment continues until the total repayable amount is cleared. If your revenue is strong, you repay faster. If it is slower, it takes longer.
Can I repay the full amount early?
Yes. Early repayment is possible. Because the total cost is fixed, early repayment does not save you money on interest but it does free you from the daily deduction. Discuss early repayment terms with your lender before you sign.
How is revenue based lending different from a merchant cash advance?
They are closely related. A merchant cash advance collects repayments strictly from card transactions. Revenue based lending can also include other income sources. Simpli Finance offers both depending on your business type.
Conclusion
Revenue based lending repayments are one of the most flexible structures available to Irish business owners. The factor rate tells you the total cost upfront and repayments flex with your actual trading, so you are never paying more than your business can afford.
At Simpli Finance, we explain every figure clearly before you commit. There are no surprises.
If you want to understand what an advance would cost your business specifically, get in touch with the team today.