Revenue Based Loans & Financing For Saas Companies In Canada - A Great Venture Debt Solution
REVENUE FINANCING IS ALL ABOUT SCALING YOUR BUSINESS!
WANT TO AVOID *EQUITY FINANCING *( FOR THE TIME BEING !)
It's no secret ! The main attraction of recurring revenue financing is the ability of your Saas firm to obtain the capital you need today to focus on your future technology investments. The ability of a software company to access additional cash is what SAAS Revenue-based financing is all about.
'The spread of the computing grid will finally establish the idea of software as a service ' ( Source - economist.com ) Let's dig in on how to finance your SAAS revenue growth rate via a monthly revenue formula solution that works!
THE POWER OF YOUR COMPANY'S SAAS SOLUTION & SUBSCRIPTIONS BASED BUSINESS MODELS
It's no secret why your company provides significant advantages to your customers via your cloud/internet solution. Your clients can also ' scale ' allowing them to utilize your services to the extent they need it, with growth or downsizing readily attainable. With the need for hardware and infrastructure gone your clients save in numerous ways including labour and tech investments.
The concept of pay per use drives Saas companies such as yours to allow clients to budget for growth capital and ' scale ' without major setup costs or the challenge of downtime
HOW DOES SAAS FINANCING WORK? REVENUE BASED LOANS 101!
A properly structured recurring revenue financing facility allows you to access funds on a regular basis, creating a borrowing base that is calculated by establishing a multiple of anywhere from 5-7 times your monthly revenues. That deferred revenue in the Saas business model is a tough nut to crack from a financing perspective and accessing a fixed percentage of fund inflows is a solid way to beat that challenge.
As we noted, this in effect creates an established predictable borrowing base for cash flow and working capital needs to run the business. Those needs are typically in the area of salaries and wages, technology investments in your infrastructure, and general working capital needs.
The ability to access business capital without the need for future private equity capital or other types of equity investments is by far the great attraction of funding those recurring revenue streams!
WHAT ARE THE BENEFITS OF A PROPERLY STRUCTURED
Is your Saas firm eligible for simple and effective revenue-based financing loans? You only need to demonstrate the firm's contracts and the cash payment terms from your contracts - which as we noted might be based on monthly, quarterly, or in some cases annual payment. Let the 7 Park Avenue Financial team ensure your funding needs are covered and tailored to your finance and cash flow needs as required by changes to the growth of your revenues - all the time delivering a non dilutive form of funding.
7 Park Avenue Financial technology financing expertise can benefit your firm from your infrastructure and platform financing needs for upgrades and purchases to your client solutions.
How can your company access the cash flow you need today without waiting for tomorrow! Let's dig in! The challenge of growing a ' Saas ' business is the need for additional capital for new and or larger contracts to grow the client base, and of course your firm's valuation. In today's lightening speed competitive environment no software firm can afford to lose out on new business and growth of your client base.
Similar to other types of venture debt such as SR&ED Financing the Saas business model is all about unlocking cash flow by monetizing contracts in the case of Saas, and r&d in the case of sr&ed development & finance.
Many Saas businesses also file SRED Funding claims to accelerate cash flows - Refundable tax credits are key factors for many Saas firms. If your business bills your client base on a monthly, quarterly, or longer-term basis the potential challenge to your business is the timing of cash flows to run your business.
LET'S MAKE SURE WE UNDERSTAND WHAT RECURRING REVENUE IS!
Recurring revenues arise out of contractual arrangements you have in place for your service/application. Contracts and client agreements like these allow your firm to have predictability in stable cash inflows for the length of your client agreement.
CHALLENGED ON HOW TO FUND AND INCREASE RECURRING REVENUE?
Recurring revenue finance solutions allow you to borrow today against those future cash inflows from customers. The availability for finding in advance of customer payments is what Recurring Revenue financing is all about.
For example, if you are billing on a monthly basis we could call that financing a current MRR LINE OF CREDIT - ( MRR = monthly recurring revenue ), establishing a maximum loan amount is easy after that.
HOW DOES SAAS FINANCING WORK? ( RECURRING REVENUE LOANS )
A properly structured recurring revenue financing facility allows you to access funds on a regular basis, creating a borrowing base that is calculated by establishing a multiple of anywhere from 5-7 times your monthly revenues.
As we noted, this in effect creates an established predictable borrowing base for cash flow and working capital needs to run the business. Those needs are typically in the area of salaries and wages, technology investments in your infrastructure, and general working capital needs.
The ability to access business capital without the need for future private equity investments is by far the great attraction of funding those recurring revenue streams!
Interest rates for Revenue financing are mezzanine type rates - the attraction is access to capital versus the cost of capital for savvy entrepreneurs who understand the value of equity!
WHAT ARE THE BENEFITS OF A PROPERLY STRUCTURED
Is your Saas firm eligible for simple and effective revenue-based financing loans? How do Saas financing companies assess your application! You only need to demonstrate the firm's contracts and the cash payment terms from your contracts - which as we noted might be based on monthly, quarterly, or in some cases annual payment depending on your company's business model.
Let the 7 Park Avenue Financial team ensure your funding needs are covered and tailored to your finance and cash flow needs as required by changes to the growth of your revenues and to delay the risk of equity dilution.
Business owners and financial managers of small businesses can only imagine the benefits of ARR lump-sum financing for those annual contracts.
That's the Saas debt financing promise when a few key factors around what stage your business is in come into play and can place stress on your company's cash flow under the subscription based revenue model, even if you have good gross margins which are desirable in this form of finance.
The early stage of every Saas firm is somewhat predictable :
Higher cash needs/cash burn
Larger investments in r&d
Mastering beta releases/upgrades
Increasing revenue and funding the cost of customer acquisition in your market/industry via digital channels, etc
7 Park Avenue Financial technology financing expertise can benefit your firm from your infrastructure and platform financing needs for upgrades and purchases to your client solutions.
CONCLUSION - SAAS REVENUE BASED FINANCING IN CANADA
If your software firm has a recurring revenue model and proven revenue streams equity-free Saas funding is a great financing tool that avoids ownership dilution in your business at a time when revenue is grown and your valuation increases. That's the promise of 7 Park Avenue financial and other debt providers who, unlike most banks, don't focus on personal guarantees, balance sheet ratios, etc.
Angel investors and VC's will also require board seats! Let's not forget that one.
Let the 7 Park Avenue Financial team deliver a revenue-based financing term sheet that meets your growth and capital needs. Saas revenue financing is the solution you have been looking for while you focus on job #1 - customer acquisition.
Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with the challenges of waiting for future cash payments from your clients based on multiples of your monthly, quarterly or annual (ARR financing ) contracts with customers.
It's a subscription-based software finance solution you've been looking for. Consider the benefits of having long-term clients that comes with a financing solution via loans for annual recurring revenue financing for your growth initiatives. Saas capital can be utilized over a long period of time while your company uses these funds to grow sales and increase the value of the business.
Whether you are an established firm or looking for sales royalty financing for startups we've got the solution you are looking for!
Saas businesses have tremendous growth potential. Growing valuation multiples for SAAS growth companies is job #1! Let's get started!
FAQ: FREQUENTLY ASKED QUESTIONS
What is Software As A Service ( Saas )?
Saas is a software solution based on the cloud computing model. It allows a software firm to deliver its solutions and application via the internet via a website or other applications. Infrastructure can also be delivered under the Saas model.
What is Recurring Revenue Financing?
Recurring revenue finance loans provided capital to offset the time required to recognize future recurring sales contracts. If a Software as a service company ( ' SAAS' ) receives monthly, quarterly, or annual payments from clients the SAAS company can monetize these contracts for cash flow needs.
What is venture debt?
Venture debt is financing via loans or lines of credit firm firms that have a history of operations but are still at a point where they don't have operating cash flows sufficient to sustain or grow the company's revenue and are unable to access bank loans and traditional financing. ' Tech banks ' are virtually non-existent in Canada which is the appeal of MRR based loans. With a solid advance rate and no restrictive covenants venture debt works! While Canadian banks of course offer lower interest rates the typical emerging Saas firm cannot access the low-cost bank capital they need.
More Information?
Check out the ' Startup Genome Report ' which identified to the industry that ' premature scaling of Saas businesses led to the majority of business failures in Saas - underlying the importance of critical financing solutions along the way.
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7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.
Business financing for Canadian firms, specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance. Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations.
Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced
business financing consultant
.Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and financing experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in-depth, hands-on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2021
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