What is Venture Debt
Venture debt is a special type of debt financing that allows fast growing companies to obtain working capital, even if they do not have traditional assets as collateral to borrow against. Venture debt can be used on its own by companies who are self-funding their growth, or used to compliment equity-based venture capital investments at various stages of a company’s growth.
In the case of startups that lack both assets and positive cash flow, venture debt providers often combine their loans with agreements known as “warrants” that also give them the right to purchase equity in order to protect themselves in the case of default.
When used as an alternative to traditional equity-based venture capital financing, venture debt allows entrepreneurs to obtain the working capital they need to grow their business, without giving up ownership in their company in the process.
As a complement to equity-based financing, venture debt can provide growth capital to extend the cash runway of a startup company in between equity funding rounds, allowing a company to achieve key milestones, demand higher valuations and minimize equity dilution.
Where We Fit In
River SaaS Capital specializes in providing debt financing to SaaS companies. We lend to SaaS companies who are generating cash in the form of recurring revenue but simply lack the assets to use as collateral for a bank loan. Our clients’ recurring revenue is validated to understand the companies’ capacity to support the debt. As a result, we do not ask for warrants as part of our debt-financing.
We also focus heavily on helping very young SaaS companies, who have strong products and positive cash flow, but are not yet generating the kind of recurring revenue numbers that make them attractive to other providers of debt or equity financing.
Frequently Asked Questions
Who is River SaaS Capital?
Our management team has over 100 years of lending, credit and operations experience. Along with our knowledge of and passion for technology, we have the precise blend of talent to help early stage technology companies grow their business.
Proudly based in Cleveland, Ohio, River SaaS Capital offers alternative financing models, entrepreneurship mentoring and a partnership approach to early-stage SaaS companies throughout the U.S.
What Types Of Companies Do We Fund?
Our financing model is best suited for software and technology based companies which market their products using the software-as-a-service model. These high-growth, high-margin companies are well-suited to debt financing options, which allow them to preserve equity while still raising working capital.
What Is Our Geographic Focus?
River SaaS Capital provides financing to U.S. companies only, with a geographic emphasis on companies located in the surrounding regions of Ohio, Western Pennsylvania, Michigan, Indiana and Illinois.
What Is Our Due Diligence Process?
Our detailed process starts out with a list of comprehensive due diligence questions that focus on the borrower’s technology and product offering, the management team and the business plan. We review historical financial statements as well as projections for the coming 24 to 36 months. Additionally, we analyze the borrower’s current customer contracts to make certain they have 18-24 month subscription-based revenues which are spread over multiple customers. We then evaluate the sales process and meet with company executives to verify their experience and ability to grow and scale a business.
Do you require venture backing to be considered for a loan?
No. One of the differences between River SaaS Capital and other venture debt providers is that we do not require previous venture capital sponsorship.
Is there a minimum or maximum loan amount?
Every situation is different but typical loans range from $500,000 to $3,000,000.
What is the minimum amount of ARR or MRR needed to be considered for a loan?
Our sweet spot for lending is companies with a minimum of $150K in monthly recurring revenue (MRR), or $1.5M in annual recurring revenue (ARR). Often, these are the same companies that are falling below, or just scraping the minimum requirements of other debt-based lenders.