SaaS Financing: 6 Options to Fund Your Software Company

SaaS financing refers to funding options specifically designed for software-as-a-service companies. Unlike traditional business loans that rely on physical assets, SaaS financing leverages your recurring revenue — your MRR and ARR — as collateral. This makes it ideal for capital-light software businesses that need growth capital without giving up equity.

This guide covers every SaaS financing option available, from revenue-based financing to venture debt, with a comparison table and decision framework to help you choose the right funding for your stage and goals.

What Is SaaS Financing?

SaaS financing is any form of capital specifically structured for subscription software businesses. Traditional lenders often struggle to underwrite SaaS companies because they lack physical assets, inventory, or accounts receivable in the traditional sense. SaaS lenders solve this by using metrics like MRR, ARR, churn rate, and customer lifetime value to assess creditworthiness.

The key advantage: you can access capital based on the predictable, recurring nature of your revenue stream rather than needing to pledge equipment, real estate, or give up ownership.

Types of SaaS Financing

SaaS companies have more financing options than ever. Here’s a breakdown of each type, with pros, cons, and when to use them.

1. Revenue-Based Financing (RBF)

How it works: You receive upfront capital in exchange for a percentage of future revenue until you’ve repaid the principal plus a fixed fee (typically 5-15%). Payments flex with your revenue — when revenue is up, you pay more; when it’s down, you pay less.

Funding amounts: Typically 1-4x your MRR, or 20-70% of ARR depending on the provider.

Repayment: Usually 6-24 months, structured as a percentage of monthly revenue or fixed monthly payments.

Best for: Bootstrapped SaaS companies with $10K+ MRR who want growth capital without dilution. Ideal for funding marketing spend, hiring, or product development when you have predictable revenue but limited cash reserves.

Pros:

• No equity dilution — you keep 100% ownership
• Fast approval (often 24-48 hours)
• No personal guarantees or board seats
• Payments flex with your revenue performance
• No restrictive covenants in most cases

Cons:

• Higher effective cost than traditional bank loans (typically 12-30% annualized)
• Requires proven recurring revenue history
• Funding amounts limited by current revenue

Providers: Founderpath (accepts $10K+ MRR, no fees, 12-48 month terms), Capchase ($100K+ ARR required), Pipe, Clearco.

2. Venture Debt

How it works: A loan specifically for venture-backed startups, usually structured as a term loan with interest payments and a balloon payment at maturity. Often includes warrants — options to purchase equity at a set price — as additional compensation to the lender.

Funding amounts: Typically 20-35% of your last equity round, ranging from $1M to $50M+.

Repayment: 2-4 year terms with interest-only periods followed by principal amortization. Interest rates typically range from 8-15% plus warrants.

Best for: VC-backed companies extending runway between equity rounds or funding specific growth initiatives. Often used to reach the next milestone before raising the next round at a higher valuation.

Pros:

• Larger funding amounts than RBF
• Extends runway without significant dilution
• Can improve negotiating leverage for next equity round
• Interest payments may be tax-deductible

Cons:

• Requires existing VC backing in most cases
• Warrants create some dilution (typically 0.5-2%)
• Covenants and reporting requirements
• Personal guarantees sometimes required for smaller rounds
• Longer approval process (weeks to months)

Providers: Western Technology Investment, Hercules Capital, TriplePoint Capital, Riverside Partners.

For a complete breakdown of venture debt terms, costs, and when it makes sense, see our venture debt guide.

3. SaaS-Focused Bank Loans

How it works: Traditional term loans or lines of credit from banks that specialize in lending to technology and SaaS companies. These banks understand recurring revenue models and don’t require physical collateral.

Funding amounts: $500K to $50M+ depending on company size and banking relationship.

Repayment: 3-7 year terms with monthly principal and interest payments. Interest rates typically 6-12% depending on creditworthiness and market conditions.

Best for: Established SaaS companies with $5M+ ARR seeking lower-cost capital for acquisitions, large growth initiatives, or refinancing existing debt.

Pros:

• Lower interest rates than alternative lenders
• Larger funding amounts available
• No equity dilution
• Building a banking relationship has long-term benefits

Cons:

• Extensive documentation and due diligence
• Slower approval (2-6 months)
• Financial covenants (minimum EBITDA, debt service coverage ratios)
• Personal guarantees often required
• Higher minimum revenue requirements

Providers: Comerica, KeyBank, Pacific Western Bank, JPMorgan Chase.

4. Merchant Cash Advance (MCA)

How it works: A lump sum advance in exchange for a percentage of future sales until the advance plus fees is repaid. Technically not a loan — it’s a purchase of future receivables.

Funding amounts: Usually based on average monthly revenue, typically $5K-$500K.

Repayment: Daily or weekly automatic debits from your bank account as a percentage of sales, usually over 3-18 months. Factor rates typically 1.1-1.5x (meaning you repay $1.10-$1.50 for every $1 borrowed).

Best for: Companies that need capital quickly and have consistent monthly revenue or credit card sales volume. Works well for bridging short-term cash flow gaps, funding time-sensitive opportunities, or situations where speed matters more than cost optimization.

Pros:

• Fast approval — often same day or next day
• Minimal credit or revenue history requirements
• No collateral needed
• Flexible qualification criteria compared to bank loans
• Payments adjust with your sales volume

Cons:

• Higher effective cost than RBF or bank loans
• Daily or weekly repayment schedule reduces available cash
• Factor rates can be harder to compare than APR-based products

Note: MCAs are well-suited for short-term capital needs where repayment speed is high. For longer-term growth financing, revenue-based financing typically offers lower total cost with monthly (rather than daily) repayment.

5. Equity Financing (VC/Angel)

How it works: You sell ownership shares in your company to investors in exchange for capital. The investors become partial owners and typically expect significant returns through an eventual exit (acquisition or IPO).

Funding amounts: $50K (angel) to $100M+ (late-stage VC), depending on stage and valuation.

Repayment: No repayment — investors get returns only when the company is sold or goes public.

Best for: Companies pursuing rapid, venture-scale growth (10x+ returns) where the capital requirements exceed what debt can provide. Essential for capital-intensive plays in winner-take-all markets.

Pros:

• Large capital amounts available
• No monthly payments — preserves cash flow
• Strategic value from investor networks and expertise
• Investors share the risk

Cons:

• Significant dilution (typically 15-30% per round)
• Loss of control — investors get board seats and approval rights
• Pressure for rapid growth and eventual exit
• Long, distracting fundraising process
• Misaligned incentives if you prefer building a profitable, sustainable business

Recommendation: Equity is the right choice when you’re pursuing a venture-scale outcome and need capital that debt can’t provide. But if you can grow profitably with smaller amounts of capital, non-dilutive funding often makes more sense. Many founders who raise equity later regret how much ownership they gave away.

6. SBA Loans

How it works: Loans partially guaranteed by the U.S. Small Business Administration, offered through approved banks. The government guarantee reduces risk for lenders, enabling better terms for borrowers.

Funding amounts: Up to $5M for standard 7(a) loans.

Repayment: Up to 10 years for working capital, up to 25 years for real estate. Interest rates typically Prime + 2.25%-4.75%.

Best for: Established SaaS companies with strong financials who can navigate the paperwork. Good for large purchases like acquiring another company or significant equipment.

Pros:

• Lower interest rates than most alternatives
• Longer repayment terms
• No equity dilution

Cons:

• Extensive paperwork and documentation
• Slow approval (2-6+ months)
• Personal guarantee required
• Collateral often required
• Many SaaS companies don’t qualify due to lack of physical assets

SaaS Financing Comparison Table

Here’s how the main SaaS financing options compare:

Financing Type	Typical Amount	Cost	Speed	Dilution	Best For
Revenue-Based Financing	1-4x MRR	12-30% APR equivalent	24-48 hours	None	Bootstrapped SaaS, $10K+ MRR
Venture Debt	20-35% of last round	8-15% + warrants	4-8 weeks	0.5-2% (warrants)	VC-backed companies
Bank Loans	$500K-$50M+	6-12% APR	2-6 months	None	$5M+ ARR, established companies
MCA	$5K-$500K	Factor rate 1.1-1.5x	1-3 days	None	Short-term gaps, fast capital
Equity (VC)	$500K-$100M+	15-30% ownership	3-6 months	15-30% per round	Venture-scale growth plays
SBA Loans	Up to $5M	Prime + 2.25%-4.75%	2-6+ months	None	Established businesses, acquisitions

How to Choose the Right SaaS Financing

The best financing option depends on your stage, revenue, growth plans, and personal preferences as a founder. Here’s a decision framework:

Choose Revenue-Based Financing if:

• You have $10K+ MRR with 6+ months of history
• You want to keep 100% ownership
• You need capital quickly (days, not months)
• You’re funding specific growth initiatives with measurable ROI (marketing, sales hires)
• You’re bootstrapped or want to stay capital-efficient

Choose Venture Debt if:

• You’ve already raised venture capital
• You need larger amounts ($1M+) than RBF can provide
• You’re extending runway to hit the next milestone
• You’re comfortable with some warrants and covenants

Choose Equity Financing if:

• You’re pursuing a venture-scale outcome (aiming for $100M+ exit)
• Your capital needs exceed what debt can provide
• You want strategic investors who add value beyond capital
• You’re in a winner-take-all market where speed matters more than ownership

Choose Bank Loans if:

• You have $5M+ ARR with strong profitability
• You need large amounts of capital at the lowest cost
• You can handle extensive documentation and slow timelines
• You’re making a major acquisition or large capital expenditure

What SaaS Lenders Look For

While each SaaS financing provider has different criteria, most evaluate similar metrics:

Monthly Recurring Revenue (MRR): The foundation of SaaS financing. Most providers require at least $10K-$50K MRR to qualify. Higher MRR means larger funding amounts and better terms.

Revenue Growth: Positive year-over-year growth signals a healthy business. Declining revenue makes funding harder to obtain.

Churn Rate: Net revenue retention above 100% is ideal. High churn signals problems with product-market fit that lenders view as risk.

Cash Runway: Most providers want to see at least 3-6 months of runway. They’re not looking to be your last resort before you run out of cash.

Customer Concentration: Heavy dependence on a few large customers increases risk. Diversified revenue across many customers is preferred.

Contract Length: Annual and multi-year contracts are more valuable than monthly subscriptions because they’re more predictable.

A well-built SaaS financial model that clearly presents these metrics will strengthen your position with any lender or investor.

How to Apply for SaaS Financing

The application process varies by provider, but here’s what to expect:

1. Connect your data: Most modern SaaS lenders integrate with your banking, accounting (QuickBooks, Xero), and billing systems (Stripe, Chargebee) to pull data automatically. This replaces the need for extensive financial documentation.
2. Review your offer: Within 24-72 hours, you’ll typically receive a funding offer with terms, rates, and maximum amounts. Review the total cost of capital, not just the headline rate.
3. Accept and fund: Once you accept, funds are usually deposited within 1-3 business days. Some providers offer same-day funding.
4. Repay: Depending on your agreement, repayment may be automatic (percentage of revenue) or fixed monthly payments via ACH.

Common SaaS Financing Mistakes to Avoid

Taking capital without a plan: Financing should fuel specific, measurable growth initiatives. Don’t take money just because it’s available.

Ignoring the true cost: A “low” interest rate can be misleading if there are origination fees, warrants, or prepayment penalties. Calculate the all-in cost before signing.

Over-leveraging: Taking too much debt relative to revenue can strain cash flow and limit your options. A good rule: keep total debt service below 20-25% of revenue.

Defaulting to equity: Many founders automatically assume they need to raise venture capital. But if you can grow profitably with smaller amounts of non-dilutive capital, you’ll own more of a valuable company at the end.

Waiting until desperate: The best time to raise capital is when you don’t urgently need it. Lenders and investors both offer better terms to companies with strong metrics and runway.

SaaS Financing FAQ

What is SaaS financing?

SaaS financing is funding specifically designed for software-as-a-service companies. It uses your recurring revenue (MRR/ARR) as collateral instead of physical assets, making it accessible for capital-light software businesses that don’t qualify for traditional bank loans.

How much funding can I get?

Funding amounts vary by provider and your revenue. Revenue-based financing typically offers 1-4x your monthly recurring revenue. Venture debt offers 20-35% of your last equity round. Bank loans can range from $500K to $50M+ for established companies.

What’s the minimum MRR required?

Requirements vary by provider. Founderpath accepts companies with as little as $10K MRR ($120K ARR). Most other RBF providers require $50K-$100K MRR minimum. Capchase requires $100K+ ARR.

How fast can I get funded?

Modern SaaS lenders that use automated data integrations can provide offers within 24-48 hours and fund within days. Traditional bank loans and venture debt take weeks to months due to extensive due diligence.

Is SaaS financing right for my company?

If you have recurring revenue, positive growth, and a specific use for capital that will generate ROI (marketing, sales, product), SaaS financing is likely a good fit. It’s particularly valuable for bootstrapped founders who want to accelerate growth without giving up equity.

Get SaaS Financing Today

If you’re a B2B SaaS company with $10K+ MRR, you may already qualify for non-dilutive funding. Check what you qualify for at Founderpath — it takes less than 5 minutes, and there’s no impact to your credit.

Founderpath offers revenue-based financing with:

• No upfront fees
• No prepayment penalties
• 12-48 month repayment terms (longer than most competitors)
• Funding decisions in 24-48 hours
• Minimum $10K MRR ($120K ARR) — lower than most alternatives

Whether you’re launching a SaaS company or looking to fund your next marketing campaign, hire your first sales rep, or extend your runway, Founderpath can help you grow without giving up ownership.