Why Would A Successful Leasing Company Start A SaaS Alternative Debt Fund?

The answer can be found in two words – opportunity and predictability.

When our parent company, River Capital Finance, first started in 1994 it was known as MRK Leasing. Over time the company, and the family behind it, developed a reputation as a go-to resource for fair, flexible and affordable equipment leasing solutions.

The company started out as a small direct lender, but performed well and survived competition from local finance companies and big banks to become a full-service independent leasing company with a diverse range of clients, from small and mid-sized firms all the way up to the Fortune 500.

River Capital’s track record is hard to argue with. However, our company has always made its reputation working with clients who have hard assets and predictable cash flows.  So why in the world would we start a fund dedicated to financing young software as a service (SaaS) companies—companies with untraditional collateral assets and significantly higher cash flow concerns?

The answer can be found in two words–opportunity and predictability.

The rate at which these mostly cloud-based SaaS businesses inquire about non-dilutive, debt-based financing options has increased steadily. There are also relatively few SaaS lenders in this market, even fewer with our level of experience and fewer still who are willing to work with smaller SaaS firms who are on their way up.

All of this adds up to a problem waiting to be solved, especially for a company like River Capital who has roots in both technology and finance, as well as a history of serving “hardware as a service” companies of all shapes and sizes.

A well-run SaaS company may not have much in the way of collateral or receivables to borrow against, but they do have the next month’s, or even the next year’s subscription revenue coming in very reliably.  For a growing SaaS company with a solid customer base the risk profile usually looks very good.

Strong SaaS companies are also excellent credit risks, due primarily to a combination of fixed revenues (slowly and steadily rising, albeit incrementally) and variable costs.  Since major costs for SaaS businesses are typically discretionary development and marketing expenses, they oftentimes have the option of cutting expenses in a pinch and keeping enough cash on hand to make payments on their debt.

This makes SaaS a much better credit risk than a more capital intensive sector with large, fixed expenses and variable or seasonal revenue.

So, if it seems strange that a popular IT equipment leasing and financing company has gotten into the SaaS lending business, it really shouldn’t. The types of companies may change over time, but the need for capital is a constant, and we believe businesses can always benefit from partners they can trust to treat them fairly and help them grow.
To find out whether River SaaS Capital’s lending options are the right fit for your SaaS business, read our FAQ, then fill out our short online application to get the conversation started.

About River SaaS Capital
River SaaS Capital is the General Partner of Viking Capital Fund, a private debt fund that specializes in providing alternative growth financing to Software-as-a-Service companies. River SaaS Capital’s innovative financing solutions differ from venture debt in the sense that it is our goal to help your business grow without the multiple restraints present in other financing options. For more information, visit www.riversaascapital.com and follow @RiverSaaSCap on Twitter. Banyan Technology Raises $2 Million in Debt-Based Funding from River SaaS Capital