Equity Capital vs. Debt Capital
Your Goals Decide Your Growth Avenue
Equity and debt capital are two of the most common funding options for SaaS companies.
Debt capital refers to funds borrowed through a loan to be repaid over time with interest. While debt capital is an attractive option for businesses that don’t want to dilute their ownership, traditional loans may not be possible for SaaS start-ups that don’t have the necessary collateral.
Venture Debt Capital
Venture debt capital is a loan that takes intellectual property to purchase equity as collateral in place of tangible assets like buildings or equipment, which is why it’s a good option for SaaS companies that do not have the tangible assets to acquire a bank loan.
When connected to the right venture debt capital partner, you’ll be able to structure a deal that matches how your business runs — including your revenue stream, goals, desired growth pace, and overall strategy. The greatest benefit of venture debt capital is that it doesn’t involve any exchange of ownership, so you retain complete control over business decisions.
Equity capital is provided in exchange for stock in your company. This is not necessarily a negative, since an ownership stake gives an investor incentive to provide additional support and advice to help your business grow and achieve its goals.
While an investor’s valuable SaaS industry experience can benefit your business, conflict may arise if their vision diverges from yours. You may have to make concessions in terms of hiring, using certain tooling, or decisions regarding the funds received from the agreement.
Ultimately, the choice between equity and debt capital depends entirely on your priorities and goals.
Venture debt capital offers maximum control and better exit options. Equity capital provides strategic support for strengthening your infrastructure and daily operations.
The most essential part of your funding decisions is partnering with investors you can trust that will help you make the best choice to support the realization of your unique vision.
Learn more about River SaaS Capital’s differentiators that can help you leverage the momentum of your business.