From Nov 2023, this paper goes in-depth on RBF.
Abstract
We use transaction-level data from a major payment processor to study FinTech-provided small business "revenue-based financing." After eight months, payments through the processor are 16% lower for businesses who take financing offers than observably similar non-takers, driven by moral hazard from revenue hiding and adverse selection. Two natural experiments suggest FinTech platforms' non-lending interactions with small businesses---e.g., payment processing and inventory management---can limit both hiding and selection. By tying repayment to the continued use of non-lending products, FinTechs can mitigate enforcement and monitoring frictions. Our results help explain the rise of FinTech-provided revenue-based financing.