Every small business reaches a financial fork in the road. You’re bringing in revenue, but there’s also a pile of debt—or maybe a fresh opportunity to grow. So now you’re asking: Should I pay down what I owe first… or take on smart capital to push the business forward?
It’s a fair question. You want to stay responsible, but also responsive to opportunities. The truth is, there’s no one-size-fits-all answer. But there are tools—and strategies—that can help you decide.
In this guide, we’ll explore:
The two most popular debt repayment strategies: Snowball and Avalanche
How to choose the right fit for your business cash flow, goals, and stage of growth
Understanding the Debt Repayment Mindset
Debt isn’t always bad. In fact, taking on funding is often how businesses grow—especially in early stages. But once you’re carrying multiple payments, credit cards, or high-interest loans, it can feel overwhelming.
Most business owners choose one of two debt reduction paths:
Avalanche Method: The Mathematically Smart One
What it is: You pay the minimum on all debts but throw extra cash at the debt with the highest interest rate first.
Why people like it:
You save more on interest in the long run
It’s the fastest way to become debt-free on paper
Why it’s tough:
You might not see quick wins. Big balances can take time to shrink.
It’s less emotional and more logical—which doesn’t always feel motivating.
Snowball Method: The Psychologically Motivating One
What it is: You still pay all minimums, but focus any extra cash on your smallest balance first—regardless of interest rate.
Why people like it:
Quick wins. You knock out small debts fast.
Builds momentum and motivation.
Why it’s tough:
You might pay more interest over time.
Not ideal for large or high-interest debts.
What Is Revenue-Based Financing?
While debt payoff strategies focus on eliminating what you owe, Revenue-Based Financing (RBF) is a tool designed to grow while staying flexible. With RBF, you borrow money, but repay it based on a fixed percentage of your future revenue—not a fixed monthly payment.
Here’s how it works:
You qualify based on monthly or annual revenue
You receive fast funding (often same-day)
You repay a small % of your daily/weekly/monthly sales
If revenue slows, repayments shrink too
Key difference from loans: With traditional debt, your payment is fixed no matter what. With RBF, it adapts to your cash flow.
If you’re unfamiliar with the concept,this guide to investment-readiness breaks down how smart funding strategies like RBF can actually help position your business for outside capital later.
Side-by-Side Comparison
Let’s break it all down visually:
Feature
Avalanche Method
Snowball Method
Revenue-Based Financing
Payment Type
Fixed monthly
Fixed monthly
% of revenue
Focus
Highest interest rate first
Smallest balance first
Growth + repayment flexibility
Speed of Results
Slow but efficient
Fast wins, slow savings
Fast capital, repayment varies
Good For
High-interest debt holders
Motivation seekers
Growth-stage businesses
Monthly Pressure
High
High
Low (adapts to cash flow)
Collateral Required
Sometimes
Sometimes
Never
Credit Score Required
Yes
Yes
Often not required
When Revenue Drops
Still pay full amount
Still pay full amount
Pay less
Real-Life Example – Two Paths for the Same Business
Let’s say you own a growing mobile grooming service. You’ve got:
$40,000 in total debt (credit cards, a merchant loan)
$10,000/month in average revenue
Seasonal dips every winter
Now imagine two paths:
Path A: Avalanche Payoff Plan
You focus on your 26% APR credit card first
You send $1,500/month toward the debt
You keep costs tight and avoid new investments
After 28 months, you’re debt-free
But during winter? You still owe $1,500/month even if sales drop to $6,000. Stressful.
Path B: Revenue-Based Funding Route
You use RBF to access $50,000 in new capital
You invest in a second grooming van + digital ads
You pay 10% of revenue until it’s repaid
If you have a $12,000 month, you repay $1,200. If it’s $6,000, you pay $600.
End result? You potentially grow faster, handle downturns easier, and still repay responsibly.
Revenue-based capital isn’t the answer to every situation. Sometimes, getting lean and debt-free is the best option. Here’s when debt reduction wins:
✅ You have predictable cash flow ✅ You’re not planning major investments soon ✅ You’re carrying multiple high-interest debts ✅ Your business is stable but not scaling aggressively
In this case, Avalanche might save you thousands. Snowball might give you fast wins. Either works—just stick with it.
Want to pair this with smarter day-to-day management? Our guide oncredit card mastery for small businesses teaches practical ways to manage vendor bills and rewards wisely.
When Revenue-Based Financing Makes More Sense
Revenue-based financing is ideal for businesses that need breathing room to grow. If you’re in the “scale or stall” phase, RBF could help you leap forward.
✅ Your revenue is growing (but uneven) ✅ You need funding fast (not weeks of paperwork) ✅ You don’t want collateral or credit score hurdles ✅ You’re willing to trade total cost for flexibility
Seasonal businesses, new product launches, and marketing investments all benefit from adaptable repayment schedules. Plus, RBF won’t add stress when revenue dips—payments shrink too.
If you’re holding onto cash in a high-yield reserve,this strategic surplus fund blog explains how to put that money to work (while staying safe).
Blended Strategy — Pay Down + Power Up
You don’t have to pick one or the other.
Let’s say:
You use Avalanche to chip away at high-interest credit cards
Meanwhile, you use RBF to fund a new revenue stream
As sales grow, you speed up debt payoff with extra cash
That’s a smart hybrid plan. You eliminate bad debt and invest in growth—without overwhelming your cash flow.
Ask These Questions Before You Decide
Still unsure which path to take? Ask yourself:
Can I afford fixed monthly payments during slow months?
Do I want to expand this year, or hold steady?
Is my debt costing more than it earns me?
Do I have a solid plan for using new capital effectively?
If you’re mostly answering “yes” to #1 and #3, consider Avalanche or Snowball. If you’re saying “yes” to #2 and #4, RBF might be the better move.
How Capital Express Helps You Decide
At Capital Express, we’re not here to push you into more debt. We’re here to help you grow wisely, stay flexible, and make decisions that protect your future.
We offer:
Revenue-based funding up to $5M
Same-day approvals and wire transfers
No collateral, low credit impact
Smart calculators to help you plan
Pre-qualified offers based on real revenue, not guesswork
Whether you choose to eliminate debt fast or use revenue-based capital to grow first, what matters is being intentional. Don’t default to high-interest loans or freeze your business in fear.
You’ve got options. You’ve got tools. And now—you’ve got a clearer view of what path is best for your business.
Let Capital Express help you run the numbers, simplify your cash flow, and breathe easier. No pressure. Just progress.
FAQ: Debt vs Revenue-Based Financing
Q: Is revenue-based financing risky? A: Not when managed well. Because payments scale with income, it’s less risky during downturns than traditional loans.
Q: Can I use both strategies at once? A: Absolutely. Many businesses pay down old debt while using revenue-based funds to support new growth.
Q: Does revenue-based financing hurt my credit? A: Not typically. Most RBF options don’t require hard credit pulls or appear on your credit report.
Q: How fast can I get funded with Capital Express? A: You can get pre-qualified in minutes and funded the same day—depending on your documents and business performance.
