Debt, revenue-based financing for smaller SaaS

searcher profile

May 13, 2022

by a searcher from University of Pennsylvania - The Wharton School in Washington, DC, USA

I am considering rolling up a few smaller SaaS businesses (ARR under 1M, each).

Has anyone worked with these financing options on smaller SaaS deals:
a) debt providers - I see a lot of referrals to Live Oak here, do they operate with a floor for revenue or cash flow?
b) revenue-based financing - including marketplaces like Pipe, Capchase

Are there other financing structures I should think about for a smaller SaaS company?

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commentor profile
Reply by an investor
from University of Pennsylvania in New York, NY, USA
LiveOak financed my SaaS acquisition which was in the $1M to $5M ARR range. Unlike some other lenders they get that SaaS is a fantastic business model for lenders despite not having hard assets. They continue to be supportive partners. Can't say enough good things about them. ^redacted‌ and ^redacted‌ are a great team to contact.
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Reply by an investor
from University of Pennsylvania in New York, NY, USA
Regarding revenue based financing, when I've looked at it before, it's insanely expensive relative to SBA. I think it's a better fit for high growth SaaS looking for an alternative to VC capital because as expensive as it is, it's still cheaper than VC equity. I think it would also be useful if your deal can't fit the SBA box for some reason (seller needs to roll equity, more than $5M funding needed, buyer is on parole, etc.).
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