Royalty Based Financing Solutions For Saas Companies In Canada
Revenue-based financing is a new alternative to more conventional investments in the past decade, which tend to be equity financing based or debt - a solid solution and good fit for start ups as well.
REVENUE BASED FINANCING - THE BETTER OPTION FOR THE SAAS COMPANY?
Recurring revenue finance lets founders raise funds for early stage companies for their growth initiatives without diluting their shares or providing collateral after their initial investment to start the business - Monthly recurring revenue from gross revenues repays the loan. Revenue based options are often viewed as better solutions than venture capital or bank financing simply because ownership stake remains intact :
1. Collateral is not required / No Personal Guarantees
2. Repayment is a flexible way to provide capital for a business - and unlimited funding is possible based on your revenues geared to monthly payments - Royalty financing is 'non dilutive'
3. Access to capital can be achieved in weeks - not months - your funding needs are aligned to your growth projections and loans are finished when the predetermined amount has been repaid on the initial loan amount based on your firms ' MRR ' - monthly recurring revenue.
Those are 3 great reasons to choose revenue based financing. Revenue based financing is a powerful lending option. ' RBF ' offers flexibility and enables businesses to grow. More and more firms are turning to alternative financing solutions.
Revenue-based financiers analyze a business's past and future, both digital marketing spend and monthly sales revenue to determine whether or not they will provide a loan. Revenue-based financiers will ask for data about your business to predict its growth and make funding decisions - allowing owners to maintain full control
T hat allows you to repay the amount depending on your monthly revenue. Revenue-based financing is a loan with no interest, equity dilution or collateral required.
The revenue-based financing model provides an alternative to traditional bank loans, by only requiring a company to pay back during periods in which they generate revenues.
If you get a part of your future revenue upfront, then this is an opportunity for fintech owners to have more flexibility in using that money. A revenue-based financier can provide businesses with upfront funding, which is repaid based on the business's sales.
There are many different ways to raise capital for your SAAS ( software as a service), but each option comes with a caveat.
THE ALTERNATIVE TO VENTURE CAPITAL / DEBT FINANCING
Angel investors and VC funds are used for startups that need heavy investment. Angel investors and VC funds are usually difficult to get funding from as they seek at least 10x return on their investments.
Under Saas financing businesses c use committed sales revenues as collateral for financing. Most experts agree it is better to grow your company and reach milestones before looking for VC funding.
Entering the revenue-based financing space is a big step for any company, but one that can be very rewarding. Saas funding provides your company with the tools and metrics to help you track your business growth - thereby giving any future investors or lenders more confidence in investing or lending.
HOW TO EVALUATE YOUR SAAS FUNDING / REVENUE-BASED FINANCE OPTIONS
Consider the effects of loans carefully; don’t just look at how much you can pay back, but also think about your future growth. Think carefully about how the loan is structured as it will affect your company’s future growth.
1. To avoid a severe cash crunch, your company's debt should not exceed 33% of annual revenue.
2. When considering repayment ability, consider how your company's growth can cover the SAAS funding via your strong gross margins associated with Saas
3. When a company is looking for funding, it may be asked to provide warrants. Warrants are the right to buy your company's equity in the future at a price agreed today.
4. Future options are important to keep in mind while evaluating loans. Ensure that lending terms keep your future options open.
Revenue-based funding provides borrowers with control of the business and increases the distance between borrowers in different stages of funding.
CONCLUSION- UNDERSTANDING THE REVENUE BASED FINANCING INVESTMENT VIA GROWTH FUNDING & ' VENTURE DEBT '
Revenue-based financing is a way to grow your business that has been proven successful for many businesses. The way to grow your business is by partnering with the right Revenue-based financier. Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian Business Financing advisor who can assist you with your funding needs for growth capital and entering new markets while taking your company to the next level of business success.
FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION
How does revenue-based financing work?
Revenue-based financing is a way that firms can raise capital by pledging a percentage of future ongoing revenues in exchange for money borrowed.
Is Revenue Based financing a loan?
A principal investment amount is agreed upon by both the borrower and lender. Loans are paid back with a fixed percentage of monthly revenue.
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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.
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