The five funding structures every seller should be able to compare
Revenue-based, inventory, PO financing, lines of credit, term loans — one honest comparison, including when each one is the wrong answer.
Most funding content is written by whoever sells the product it recommends. This is the comparison we give sellers on day one — including the failure mode of each structure, because every one of these is wrong for somebody.
Revenue-based financing
The mechanic: capital now, repaid as a fixed percentage of sales until a set total is reached. Payments breathe with your revenue.
Right when: the capital drives near-term sales — ad scaling, restocks of proven SKUs — and your margin comfortably clears the fee.
Wrong when: you repay fast. The fee is flat, so a quick payback means a high effective annual cost; disciplined borrowers with bank options often have cheaper paths. Also wrong when margins are thin: the remittance comes off the top, not off profit.
Smell test: a transparent provider will tell you total repayment, remittance rate, and what happens in a zero-revenue month without being asked twice.
Inventory financing
The mechanic: capital advanced against the stock you're purchasing; the inventory itself is collateral (via a lien, not ownership). Repaid on sell-through.
Right when: proven SKUs, steady velocity, and a purchase too large for comfortable cash. The classic reorder-and-seasonal-buy tool.
Wrong when: the product is unproven, seasonal in a fad sense, or perishable. Lenders discount uncertain inventory hard, and a facility against stock that doesn't move becomes a slow-motion problem.
Smell test: good inventory lenders ask sharp questions about lead times and sell-through curves. A lender who doesn't ask is pricing that ignorance into your rate.
Purchase order financing
The mechanic: a lender pays your supplier directly against a confirmed order from your buyer, and collects when the buyer pays. Your buyer's credit does the qualifying.
Right when: a confirmed PO from a creditworthy retailer or distributor exceeds your cash. The only structure where deal size can massively exceed your history.
Wrong when: margins are thin (the monthly fee eats them), the buyer is small or unrated, or the "order" is really a forecast. PO financing needs a real PO.
Smell test: expect supplier verification and buyer credit checks. A "PO lender" who skips them is doing something else with worse paperwork.
Line of credit
The mechanic: a revolving limit; draw, repay, draw again. Interest only on the outstanding balance.
Right when: recurring, predictable gaps — payout schedules, deposit timing — and as standing dry powder. The cheapest insurance in commerce.
Wrong when: the need is one large, long-duration investment. Lines are sized for smoothing, not transformation, and revolving debt that never revolves is a term loan with worse pricing.
Smell test: know the difference between the fintech line (fast, data-underwritten, pricier) and the bank line (slower, cheaper, relationship-building). Owning both, in that order, is a common and sane path.
Term loan
The mechanic: fixed amount, fixed schedule, the structure your parents would recognize.
Right when: multi-year investments — hiring, equipment, expansion — where predictability is worth more than flexibility.
Wrong when: the payoff is seasonal or uncertain. Fixed payments don't care that Q1 is slow, and prepayment penalties can punish you for winning early.
Smell test: read the personal-guarantee and prepayment clauses before anything else. The headline rate is the most negotiated and least important line.
The pattern
Notice what's absent: nothing here requires daily debits, hidden factor rates, or renewal treadmills. Every legitimate structure states its total cost and repays in a way that matches how commerce revenue actually arrives. That's the bar. Anything under it isn't on our panel, as a matter of policy.
Which one fits your situation depends on the opportunity, the margin, and the timeline — the three questions our matching starts with.