Provider of debt financing for software-as-a-service (SaaS (News - Alert)) businesses SaaS Capital, in conjunction with private investment banking partnership DH Capital, made a recent announcement in regards to the launch of a new fund aimed squarely at emerging SaaS businesses. The fund will provide senior debt loan facilities to SaaS companies with more than $3 million in revenue.
The thinking is that since growth requires capital and value creation in the SaaS business is based on growth, a service meant to give a helping hand at a crucial point in a SaaS business' life will ultimately propel the industry forward. Specifically, the SaaS Capital line of credit is designed to meet the needs of SaaS companies which are past the start-up stage but require more capital to ensure future growth. This allows businesses to essentially self-fund their growth activities as they are borrowing against future cash flow streams. Best of all, SaaS Capital's credit facility can be used alongside venture capital financing or replace it entirely.
Todd Gardner, CEO of SaaS Capital, said of the new fund: “It’s an exciting time to be launching this new fund. Prospects for SaaS businesses have never been brighter, but the availability of capital has not kept pace. Even as the business model has flourished and weathered a recession, SaaS remains undervalued and underserved. We are pleased to offer this additional funding alternative to support businesses seeking to fund their own growth.”
Credit availability is determined in one of two ways: by an advance rate against booked but unbilled contract value or by a multiple of monthly recurring revenue. Loan amounts can be anywhere between $1 million and $4 million. The advantages of SaaS Capital's approach to growth capital are threefold: First, since credit is determined by future revenues, the total amount of available capital will increase as the business grows. Second, companies need only draw down capital as needed, reducing overall borrowing cost. Third, an SaaS Capital line will likely provide more capital than most banks.
“Our SaaS Capital line-of-credit was clearly superior to traditional bank debt, additional venture capital, or a venture debt term loan," says Sean Noonan, CFO of Clickability and a former SaaS Capital customer. "We would be happy to be a customer again and it’s great to see this new fund available in the market for other companies like ours.”
Edited by Carrie Schmelkin