Recurring-Revenue Lending

How It Works —

A financier provides your business with a multiple of your monthly recurring revenue in the form of a line of credit. Each month, the amount of financing that you can access will go up and down based on your revenue. You will only pay interest on the amount you borrow.

Example —

You agree to a 3x multiple with the financier. Based on 3x your $500k monthly recurring revenue, your business has access to a $1.5M line of credit. Next month, you grow revenue to $600k in MRR and now have access to 3x that for a total of $1.8M in funding. The financier only charges you interest for the amount you actually borrow.

You Might Be A Fit If —

• You sell a SaaS product to other businesses or organizations.
• You have a recurring revenue business model.
• You have predictable customer retention.

Why You Would Use This —

• The available funding amount scales with your business revenue.

• Matching your burn to the monthly funding amount that you have available can extend the runway for your business.

• You can manage the financing costs by choosing how much you want to borrow and payback.

Things to Watch Out For —

• Some lenders will require an audit or exam by a third-party to ensure your revenue is what you say it is. 

  • Many times these audits can be done virtually to reduce costs. 

• The amount available to you might be decreased based on your customer churn. 

  • Evaluate your customer churn to see if the line of credit gives you adequate funding for the cost.

• There might be a fee that you pay based on the amount that you are not borrowing. 

  • Calculate any unused line fees to make sure you aren’t paying a high cost if you don’t plan to use the funds often.