The Ultimate SaaS Conferences Calendar!
Debt or revenue-based funding? This a common dilemma for many SaaS founders today seeking working capital to boost their startups. In this blog post, we’ll dive into the details of debt financing and revenue-based financing, exploring the pros and cons of each, so you can make a well-informed choice for your startup today.
Freebie
Debt financing is when you borrow money from lenders, such as banks or venture capital firms, and pay it back in installments, with interest. It is suitable if you do not want to give up a chunk of your business and pursue growth plans without losing control.
The ability of your company to secure a loan from lenders is mostly based on your current financials and creditworthiness.
Revenue-based funding, or royalty-based financing, is an alternative financing model designed for SaaS(Software as a Service) startups.
Instead of giving up equity or having to pay back a loan, you agree to pay a portion of your future monthly revenue to the investor until a pre-agreed amount is reached.
Therefore, it’s a flexible and less risky alternative to traditional financing that aligns with the startup’s growth and only requires repayment when the company is making money.
Revenue financing loans are typically provided by alternative lending companies, startup accelerators, venture capital firms, and sometimes angel investors. These types of investors are looking for higher returns than they might get from traditional investments, and they believe in the growth potential of the company they are investing in.
Investors will check your recurring revenue to decide how much money they can lend you. Most of the finance providers set maximum investment amounts of up to a third of the company’s ARR(Annual Recurring Revenue) or four to seven times their MRR(Monthly Recurring Revenue). Repayment fees are usually 6-12% of the company’s revenue.
Comfi is another way to boost your B2B startup that provides you with the upfront capital you need without giving up your equity or putting your startup at risk of debt default.
Comfi is a Buy Now, Pay Later (BNPL) solution developed for B2B SaaS providers. It allows your customers sign up for your annual subscription plan, but pay monthly at a discounted rate, while you get paid upfront by Comfi. No risk to you.
Co-founder at Comfi
· It is important for you to know precisely how much money you owe each month;
· You are comfortable making set payments every month;
· You are qualified for a bank loan, having a good credit history and good credit rating;
· The money will be used for variable costs and the investment can result in immediately increased cash inflow.
· Are a company with seasonal performance;
· Need to invest in initiatives that are not very likely to drive revenue right away;
· Require a small amount of investment for a short period of time;
· Don’t want to wait for the lender’s decisions for months.
· Increase your cash flow for good, not just use a loan that you have to pay back. Effortlessly upsell your customers and turn MRR into ARR;
· Minimize acquired capital’s associated risks;
· Have money for any investment purposes, short-term or long-term, whether it will drive revenue in the near future or not;
· Improve your customer’s experience by offering payment flexibility;
Before binding your business to any form of financing, it’s vital to consider its long-term obligations. All types of lending has its own risk. See what form of investment you need at the moment, what you qualify for, and what obligations you can meet without jeopardizing your business.
Co-founder at Comfi
The Ultimate SaaS Conferences Calendar!
Stay updated on the latest industry trends, exclusive insights, and expert tips on maximizing revenue.