Non-Dilutive Funding: 8 SaaS Financing Options Compared

Every SaaS founder faces the same tension: you need capital to grow, but raising it often means giving up ownership. Venture capital gets the headlines, but it isn’t the only path. Non-dilutive funding lets you raise capital without surrendering equity, and for subscription businesses with predictable revenue, it’s often the smarter choice.

This guide covers everything SaaS founders need to know about non-dilutive funding — what it is, how it compares to dilutive financing, the eight main types available, and how to choose the right option for your stage and goals.

Whether you’re a bootstrapped founder looking for your first growth capital or a scaling SaaS company optimizing your capital structure, understanding non-dilutive funding is essential. The right financing decision at $1M ARR can save you millions in equity value at exit.

What Is Non-Dilutive Funding?

Non-dilutive funding is any form of capital that doesn’t require you to give up equity or ownership in your company. Unlike equity financing — where investors receive shares in exchange for capital — non-dilutive funding preserves your ownership stake entirely.

Common forms of non-dilutive funding include revenue-based financing, venture debt, government grants, term loans, and tax credits. Each works differently, but they share one critical trait: you keep 100% of your company.

For SaaS founders, non-dilutive funding is particularly attractive because subscription revenue is predictable and verifiable. Lenders and financing platforms can underwrite your monthly recurring revenue (MRR) or annual recurring revenue (ARR) with high confidence, making approval faster and terms more favorable than traditional lending. Unlike a restaurant or e-commerce business where revenue is volatile, a SaaS company with 95% net revenue retention and low churn is an ideal borrower for non-dilutive financing products.

Dilutive vs. Non-Dilutive Funding: The Real Cost of Equity

Before diving into specific non-dilutive options, it helps to understand what equity financing actually costs. Most founders underestimate the true price of dilution because they focus on the percentage given up today rather than what that percentage is worth at exit.

The Dilution Math

Consider a SaaS company raising $2 million at a $10 million pre-money valuation:

• The founder gives up 16.7% equity ($2M / $12M post-money)
• If the company exits at $50 million, that 16.7% is worth $8.35 million
• If the company exits at $100 million, that 16.7% is worth $16.7 million
• The founder effectively paid 4x to 8x the original capital raised

Now compare that to non-dilutive alternatives. Revenue-based financing for the same $2 million might cost a total repayment of $2.2M to $3M (a 1.1x to 1.5x repayment cap). Term loans might cost $2.4M over three years at 8% interest. In both cases, the total cost is a fraction of what equity financing costs at a successful exit.

Side-by-Side Comparison

Factor	Dilutive (Equity) Financing	Non-Dilutive Funding
Ownership impact	Give up 10–30% per round	Keep 100% ownership
Board control	Investors often get board seats	No board seats or governance changes
True cost at $50M exit	$5M–$15M in equity value	$200K–$1M in interest/fees
Speed to close	3–6 months	Days to 6 weeks
Repayment obligation	None (equity is permanent)	Yes (scheduled repayments)
Strategic value	Investor network, mentorship, credibility	Capital only (no strategic support)
Best for	Pre-revenue, unproven markets, need for expertise	Revenue-generating, proven model, want to retain control

This doesn’t mean equity financing is always wrong. If you’re pre-revenue, entering an unproven market, or need strategic investors who bring distribution and expertise, VC can be the right choice. But for SaaS companies with proven product-market fit and recurring revenue, non-dilutive funding often delivers better economics.

Why Non-Dilutive Funding Is Growing

Non-dilutive funding has surged in popularity among SaaS founders, driven by several converging trends:

VC valuations have compressed. After the 2021–2022 funding boom, SaaS valuations dropped significantly. Companies that might have raised at 20x ARR in 2021 are now raising at 6–10x ARR. For founders, this means giving up more equity for less capital. Non-dilutive alternatives look increasingly attractive when the equity market is unfavorable.

Revenue-based financing infrastructure matured. Five years ago, RBF options were limited and expensive. Today, multiple platforms compete for SaaS borrowers, driving down costs and improving terms. Integration with billing platforms like Stripe means underwriting can happen in hours, not weeks.

Founders are staying bootstrapped longer. More SaaS founders are choosing to build profitable businesses without VC. According to industry surveys, the majority of SaaS companies are bootstrapped. These founders need growth capital but have no interest in dilution — making non-dilutive funding their primary financing channel.

Customer acquisition costs keep rising. With SaaS CAC increasing 60–222% over the past five to eight years, founders need more capital for growth but can’t afford to give up equity at inflated acquisition costs. Non-dilutive funding lets you invest aggressively in growth without the dilution penalty.

Alternative financing options have multiplied. Beyond traditional RBF, SaaS founders now have access to ARR-based lending, MRR lines of credit, and hybrid instruments that combine elements of multiple funding types. The market is more competitive, which means better terms for borrowers. Platforms specialize by stage, industry vertical, and geography — making it easier to find a provider that understands your business.

8 Types of Non-Dilutive Funding for SaaS Companies

Not all non-dilutive funding is created equal. Each type has different eligibility requirements, costs, speed, and trade-offs. Here’s a breakdown of the eight most relevant options for SaaS founders.

1. Revenue-Based Financing (RBF)

Revenue-based financing provides upfront capital in exchange for a percentage of your future monthly revenue until the advance is repaid. It’s purpose-built for subscription businesses.

How it works: A financing platform evaluates your MRR, growth rate, churn, and other SaaS metrics. Based on this data, they offer an advance — typically 3x to 5x your monthly revenue. You repay a fixed percentage of monthly revenue (usually 2–8%) until you hit a predetermined repayment cap, typically 1.1x to 1.5x the original advance.

Typical terms:

• Amount: $50K–$5M (some platforms go higher)
• Repayment cap: 1.1x–1.5x the advance
• Revenue share: 2–8% of monthly gross revenue
• Timeline: Repaid in 6–18 months
• Requirements: $10K+ MRR, 3–6 months of revenue history

Why SaaS founders choose RBF: It’s the fastest non-dilutive option for subscription businesses. Platforms like Founderpath can evaluate your revenue data by connecting directly to Stripe or your billing platform, with funding available in days rather than months. Repayments flex with your revenue — if you have a slow month, you pay less.

Best for: SaaS companies with $10K+ MRR that need growth capital for marketing, hiring, or product development without giving up equity.

2. Venture Debt

Venture debt is a loan specifically designed for venture-backed startups. It typically comes as a complement to an equity round — most venture debt lenders require that you have recently raised VC funding.

How it works: A venture debt lender (such as Silicon Valley Bank, Western Technology Investment, or Lighter Capital) provides a term loan, usually equal to 25–50% of your most recent equity round. The loan is repaid over 2–4 years with monthly interest payments and often includes warrants — giving the lender the right to purchase a small amount of equity (typically 0.5–2%).

Typical terms:

• Amount: $1M–$20M
• Interest rate: 8–15%
• Term: 2–4 years
• Warrants: 0.5–2% equity coverage
• Requirements: Recent VC round, strong growth metrics

Trade-offs: Venture debt extends your runway between equity rounds but requires monthly payments regardless of revenue performance. If your growth stalls, those fixed payments can strain cash flow. The warrant component also means venture debt isn’t truly 100% non-dilutive, though the dilution is minimal compared to a full equity round.

Best for: VC-backed SaaS companies that want to extend runway between rounds without raising additional equity at a potentially lower valuation.

3. SaaS Term Loans

SaaS term loans are traditional loans adapted for software companies. Unlike venture debt, they don’t require prior VC funding — they underwrite based on your revenue metrics.

How it works: A lender evaluates your ARR, net revenue retention, churn rate, and growth trajectory. Based on these metrics, they offer a fixed-term loan with scheduled monthly payments of principal plus interest.

Typical terms:

• Amount: $500K–$10M
• Interest rate: 7–14%
• Term: 2–5 years
• Collateral: Usually a lien on company assets or IP
• Requirements: $1M+ ARR, low churn, strong unit economics

Trade-offs: Fixed monthly payments provide predictability but don’t flex with revenue. If you have a downturn, the payments stay the same. Covenants may restrict certain business activities. However, there’s zero equity dilution and no warrants.

Best for: Bootstrapped SaaS companies with $1M+ ARR that want a large capital infusion with fixed, predictable repayment schedules.

4. Government Grants (SBIR/STTR)

Government grants are the only truly “free money” on this list — you receive capital with no repayment obligation, no equity dilution, and no interest.

How it works: Federal agencies like the National Science Foundation (NSF), National Institutes of Health (NIH), and Department of Defense (DoD) offer Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants to companies developing innovative technology. Phase I grants are typically $50K–$275K for feasibility research, and Phase II grants are $500K–$1.5M for full development.

Typical terms:

• Amount: $50K–$1.5M per grant
• Cost: Free (no repayment, no equity)
• Timeline: 3–12 months for approval
• Requirements: US-based small business, innovative technology with commercial potential

Trade-offs: Grants take months to apply for and win, require detailed proposals, and come with reporting requirements. They’re highly competitive — SBIR acceptance rates are typically 15–25%. The funding is also restricted to specific R&D activities, so you can’t use grant money to hire salespeople or run ads.

Best for: Deep-tech or healthcare SaaS companies with genuine R&D innovation that can dedicate time to the application process.

5. R&D Tax Credits

R&D tax credits reduce your tax liability dollar-for-dollar based on qualifying research and development expenses. For SaaS companies, software development activities — designing, developing, and testing new features — typically qualify.

How it works: You calculate qualifying R&D expenses (typically developer salaries, cloud computing costs for development, and contractor costs for software development), then apply either the regular or alternative simplified credit method. Startups with less than $5 million in gross receipts can apply the credit directly against payroll taxes, providing an immediate cash benefit even if you’re not yet profitable.

Typical terms:

• Amount: $50K–$500K annually (varies by R&D spend)
• Cost: $5K–$15K for a tax specialist to prepare the claim
• Timeline: Claimed annually with your tax return
• Requirements: US-based company with qualifying R&D activities

Trade-offs: The credit isn’t immediate capital — it reduces your tax bill or payroll taxes. You also need to maintain detailed records of qualifying activities, and IRS audits of R&D credits have increased in recent years. Working with a specialized tax advisor is strongly recommended.

Best for: Any SaaS company with engineering staff. If you’re building software, you likely qualify and are leaving money on the table if you’re not claiming this credit.

6. Crowdfunding

Equity crowdfunding through platforms like Republic, Wefunder, and StartEngine allows you to raise capital from a large number of small investors. While technically equity is exchanged, some platforms offer revenue-share or debt-based crowdfunding that’s fully non-dilutive.

How it works: You create a campaign on a crowdfunding platform, set a funding target, and market the campaign to your community and the platform’s investor base. Regulation CF allows companies to raise up to $5 million per year from non-accredited investors.

Typical terms:

• Amount: $50K–$5M
• Platform fee: 5–10% of funds raised
• Timeline: 30–90 day campaign
• Requirements: Compelling story, existing community, SEC compliance

Trade-offs: Crowdfunding requires significant marketing effort and can be distracting from running your business. It works best for B2C or community-driven products. Most B2B SaaS companies find other non-dilutive options more efficient.

Best for: SaaS companies with a strong community or consumer-facing product that can generate excitement from individual investors.

7. Licensing and Royalty Agreements

If your SaaS product includes proprietary technology, algorithms, or datasets, you can license that intellectual property to other companies in exchange for royalty payments. This generates capital without debt or equity.

How it works: You grant another company the right to use your technology in a specific market, geography, or application. In return, they pay upfront licensing fees, ongoing royalties, or both. Some companies also offer white-label versions of their SaaS product under licensing agreements.

Typical terms:

• Amount: Highly variable ($10K–$1M+ per agreement)
• Cost: Legal fees for contract negotiation
• Timeline: 1–6 months to negotiate
• Requirements: Proprietary technology with value to other companies

Trade-offs: Licensing can create competitors or cannibalize your own market if not structured carefully. It also requires legal expertise to protect your IP while enabling the licensee.

Best for: SaaS companies with unique technology that has applications beyond their primary market.

8. Invoice Factoring and AR Financing

Invoice factoring (also called accounts receivable financing) allows you to sell outstanding invoices to a third party at a discount in exchange for immediate cash.

How it works: If your SaaS company bills enterprise customers on net-30 or net-60 terms, you can sell those unpaid invoices to a factoring company for 80–95% of their face value immediately. The factoring company collects the full payment from your customer and keeps the difference as their fee.

Typical terms:

• Amount: 80–95% of invoice value
• Fee: 1–5% of invoice value
• Timeline: Funding within 24–48 hours
• Requirements: Creditworthy customers, outstanding invoices

Trade-offs: Factoring can be expensive if used repeatedly, and it only works if you have enterprise customers on delayed payment terms. It also means a third party is collecting from your customers, which can affect relationships.

Best for: Enterprise SaaS companies with large invoices on net-30 to net-90 payment terms who need to accelerate cash flow.

Quick Summary: Which Type Is Right for You?

If you need capital fast and have recurring revenue, start with revenue-based financing — it’s the fastest and most flexible option for SaaS companies. If you need a larger amount and can handle fixed payments, explore SaaS term loans. If you’re VC-backed and want to extend runway, venture debt makes sense. And if you have time to invest in applications, government grants offer free capital with zero strings attached.

Non-Dilutive Funding Comparison Table

Here’s how the eight non-dilutive funding types compare across the factors that matter most to SaaS founders:

Funding Type	Typical Amount	Cost	Speed	Min. Revenue	Dilution
Revenue-Based Financing	$50K–$5M	1.1–1.5x cap	Days	$10K MRR	None
Venture Debt	$1M–$20M	8–15% + warrants	4–8 weeks	VC-backed	0.5–2% (warrants)
SaaS Term Loans	$500K–$10M	7–14% interest	2–6 weeks	$1M ARR	None
Government Grants	$50K–$1.5M	Free	3–12 months	None	None
R&D Tax Credits	$50K–$500K/yr	$5K–$15K prep	Annual	None	None
Crowdfunding	$50K–$5M	5–10% platform fee	1–3 months	None	Varies
Licensing/Royalties	$10K–$1M+	Legal fees	1–6 months	Proprietary IP	None
Invoice Factoring	80–95% of AR	1–5% per invoice	24–48 hours	Enterprise customers	None

Which Non-Dilutive Funding Works at Your Stage?

The right non-dilutive funding option depends on where your SaaS company is in its growth journey. Here’s a stage-by-stage breakdown:

Pre-Revenue ($0 MRR)

At this stage, your options are limited because most non-dilutive lenders need revenue data to underwrite. Focus on:

• Government grants (SBIR/STTR) — ideal if you’re building innovative technology
• R&D tax credits — claim against payroll taxes even before profitability
• Crowdfunding — if you have a community or a compelling story

At this stage, bootstrapping or a small friends-and-family round may be more practical than formal non-dilutive instruments.

Early Stage ($10K–$100K MRR)

Revenue-based financing becomes available and is often the best fit. Your SaaS metrics are measurable, and RBF platforms can move fast:

• Revenue-based financing — the primary option at this stage
• R&D tax credits — continue claiming as you build
• Government grants — still viable if you qualify

At this stage, the priority is usually growth capital for marketing and sales to accelerate MRR growth.

Growth Stage ($100K–$500K MRR / $1M–$6M ARR)

More options open up as your revenue base grows:

• Revenue-based financing — larger advances available
• SaaS term loans — now viable with $1M+ ARR
• Venture debt — if you have raised equity
• R&D tax credits — increasingly valuable as engineering team grows
• Invoice factoring — useful if you have enterprise customers on net terms

Many companies at this stage use a combination — for example, RBF for marketing spend and a term loan for a major product initiative.

Scale Stage ($500K+ MRR / $6M+ ARR)

At scale, you have the full menu of non-dilutive options and can negotiate favorable terms:

• SaaS term loans — larger facilities with better rates
• Revenue-based financing — multi-million dollar advances
• Venture debt — significant runway extension
• Licensing — your technology has proven value to license
• R&D tax credits — significant annual savings

At this stage, the question is less about qualifying and more about optimizing your capital structure — using the right mix of non-dilutive instruments to fund growth while preserving equity for a future exit. Many SaaS companies at this stage maintain revolving RBF facilities for marketing spend alongside term loans for larger strategic investments like acquisitions or international expansion.

How to Qualify for Non-Dilutive Funding

Each non-dilutive funding type has different requirements, but lenders and platforms generally evaluate the same core SaaS metrics:

• Monthly Recurring Revenue (MRR): The baseline metric. Most RBF platforms require $10K+ MRR; term loans typically require $80K+ MRR ($1M ARR).
• Revenue growth rate: Lenders want to see consistent month-over-month growth. 5–15% MoM growth signals a healthy business.
• Net Revenue Retention (NRR): Measures whether existing customers are expanding or contracting. NRR above 100% means your existing customer base is growing even without new customers. Top SaaS companies target 110–130% NRR.
• Gross churn rate: Monthly churn below 3% (annual below 30%) is generally required. Below 2% monthly is ideal.
• Gross margins: SaaS companies should target 70–85% gross margins. This is typically not an issue for software businesses but matters for lenders evaluating repayment capacity.
• Customer concentration: If more than 30–40% of revenue comes from a single customer, some lenders will flag this as a risk.

What disqualifies you: Most non-dilutive lenders will pass on companies with negative gross margins, monthly churn above 5%, declining revenue trends, or significant customer concentration risk. Some also have geographic restrictions or industry exclusions. If you’ve been rejected by one platform, it doesn’t mean all doors are closed — different lenders have different risk appetites and thresholds.

How to improve your chances: Before applying, focus on the metrics that matter most. Reduce churn by improving onboarding and customer success. Diversify your customer base so no single account represents more than 15–20% of revenue. Ensure your billing data is clean and matches your bank statements. These improvements not only help with financing — they build a healthier business overall.

The fastest way to check your eligibility is to connect your billing platform (Stripe, Chargebee, Recurly) to a financing platform. Founderpath provides a free assessment of your SaaS metrics and shows what funding you qualify for based on your actual revenue data.

How to Choose the Right Non-Dilutive Funding Option

With eight options to consider, choosing the right one comes down to four questions:

1. How quickly do you need the capital?

If you need funding in days, revenue-based financing or invoice factoring are your best options. If you can wait months, grants are the cheapest (free) option. Most term loans and venture debt fall in between at 2–8 weeks.

2. How much do you need?

For smaller amounts ($50K–$500K), RBF is typically the most efficient option. For larger amounts ($1M–$10M+), term loans or venture debt may offer better rates. For amounts under $50K, R&D tax credits or grants might cover what you need without any financing at all.

3. How predictable is your revenue?

If your revenue fluctuates significantly, choose flexible repayment options like RBF (which scales with revenue). If your revenue is highly predictable, fixed-payment options like term loans may offer lower total cost because of lower interest rates.

4. What will you use the capital for?

Growth capital (marketing, sales, hiring) pairs well with RBF because the investment should generate more revenue, which naturally covers the repayment. Infrastructure or R&D investments pair better with term loans or grants because the payback period is longer.

Non-Dilutive Funding vs. Venture Capital: When to Choose Each

Non-dilutive funding isn’t always the right answer. Here’s when each path makes more sense:

Choose non-dilutive funding when:

• You have proven product-market fit and predictable revenue
• You want to retain full ownership and control
• You need capital for specific, measurable growth initiatives
• You’re building a capital-efficient business that doesn’t require winner-take-all velocity
• You’re a bootstrapped founder who wants to stay bootstrapped

Choose venture capital when:

• You’re pre-revenue and need significant capital to reach product-market fit
• You’re in a winner-take-all market where speed matters more than ownership
• You need strategic investors who bring distribution, partnerships, or domain expertise
• Your growth requires capital that exceeds what non-dilutive options can provide
• You’re building toward an IPO and need institutional investor backing

Many successful SaaS companies use both. They raise a VC round for initial traction and market validation, then switch to non-dilutive funding for ongoing growth capital. This approach minimizes total dilution while still benefiting from the strategic value VCs provide early on.

The hybrid approach is especially common in SaaS. A founder might raise a $3M seed round to build the product and find product-market fit, then use revenue-based financing and term loans for all subsequent growth capital. By the time the company reaches $5M+ ARR, the founder retains 70–85% ownership instead of the 30–50% typical for founders who rely exclusively on equity financing through Series A and B rounds.

Common Mistakes to Avoid

SaaS founders considering non-dilutive funding should watch out for these pitfalls:

• Confusing RBF with a merchant cash advance (MCA): MCAs target retail businesses with daily holdbacks and much higher effective costs (1.2–1.5x factor rates). RBF targets subscription businesses with monthly repayment at 2–8% of revenue. If a lender proposes daily or weekly repayments, you’re looking at an MCA, not true RBF. Learn more about the difference in our revenue-based financing guide.
• Stacking too much debt: Non-dilutive funding still needs to be repaid. Taking on multiple loans or RBF agreements simultaneously can create a repayment burden that chokes cash flow. As a rule of thumb, keep total debt service below 20–25% of gross revenue.
• Ignoring covenants: Term loans and venture debt often include financial covenants — minimum revenue thresholds, maximum burn rates, or restrictions on additional debt. Violating covenants can trigger default provisions. Read the fine print carefully.
• Using the wrong type for your stage: A pre-revenue startup applying for a SaaS term loan wastes time. A $5M ARR company applying for a $50K SBIR grant is misallocating effort. Match the funding type to your stage using the framework above.
• Treating all non-dilutive options as equal: A 1.3x repayment cap on $500K (total cost: $150K) is very different from 12% interest on a $2M term loan over 3 years (total cost: ~$390K). Calculate the total cost of capital for each option, not just the headline rate or percentage.
• Not having clean financial data: Non-dilutive lenders underwrite based on your SaaS metrics. If your MRR data is inconsistent across platforms, your churn calculation is unclear, or your revenue recognition is messy, you’ll either get rejected or receive worse terms. Clean up your financial data before applying — it directly impacts how much you can raise and at what cost.

Related Funding Guides

Explore more resources on SaaS financing:

• Revenue-Based Financing: Complete Guide for SaaS Companies
• SaaS Term Loans: What to Know Before You Borrow
• B2B SaaS: What It Is, Examples, and How to Build One
• Types of Startup Funding: Every Option Explained

Get Non-Dilutive Funding for Your SaaS Company

If you’re a SaaS founder with recurring revenue, you likely qualify for non-dilutive funding today. Founderpath helps bootstrapped SaaS companies convert their monthly subscriptions into upfront capital — with no equity, no personal guarantee, and flexible repayment that scales with your revenue.

Connect your Stripe or billing platform, get a free revenue assessment, and see what you qualify for. You’ll also get free SaaS metrics reporting and a real-time valuation benchmark based on what similar SaaS companies have sold for or raised at in the past six months.

Get started for free — it takes less than five minutes to connect your data and see your funding options.