The Pros and Cons of SaaS Capital

The software industry is fast moving away from one-off purchases into subscription-based models. This shift is helping software companies stabilize revenues with recurring income while driving down manufacturing/distribution costs.

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The Pros and Cons of SaaS Capital

The software industry is fast moving away from one-off purchases into subscription-based models. This shift is helping software companies stabilize revenues with recurring income while driving down manufacturing/distribution costs. 

Plus, customers benefit from flexibility (they can pay less up front and cancel before costs eclipse an equivalent one-time purchase) and automatic updates as the software evolves.

Although your SaaS company might offer an excellent product delivered almost entirely online, there’s room for more growth in this exciting space.

Saas capital funding could be your ticket to this growth. Business Capital Consultants USA can help you determine for sure if that’s the case. Below are the pros and cons of Saas capital so you can be as informed as possible when working with us.

The Pros of SaaS Capital

  • You’re Attractive to Investors

The monthly recurring revenue (MRR) business model that SaaS companies like yours follow, as well as your growth potential, makes your business an appealing process to many investors. Not to mention the low manufacturing and distribution costs that make you even more attractive.

  • Future Income Now

One of the primary appeals of running a SaaS company is recurring revenue streams. If you can keep your churn rate low, you’ll have plenty of recurring income — but you’ll also be even more attractive to SaaS capital investors.

You can think of SaaS capital as a way to access that future income in the present. You’ll have more money to invest in the operations that create those recurring income streams.

  • Funding Variety

SaaS capital can take many forms depending on your business’s needs. 

You could get a fixed loan to make a substanial investment in equipment. Or perhaps you obtain a line of credit to extend your working capital capabilities on the fly. You have plenty of options.

  • Helps You Build Credit

There’s a good chance you’ll seek credit in the future to invest in larger projects. SaaS capital let you build your credit while you’re small (and perhaps don’t have much credit history), making those more advanced forms of debt easier to acquire down the road.

  • Repayment Terms May Scale With Growth

SaaS lenders and investors understand the fast-growth nature of their industry. They know how to pick companies with potential, and may offer these companies flexible payment terms.

In most cases, this means you’ll have low repayment in the beginning. As you grow, your payment amount will increase accordingly. Under this model, you won’t have to worry as much about making your payment. You can divert more energy to running your business.

The Cons of SaaS Capital

  • Excellent Customer Retention History Required

Recurring revenue is a double-edged sword, at least when it comes to finding funding. Customer retention is of the utmost importance in an industry with a subscription-based business model.

If your churn rate isn’t low, you may have a tough time attracting SaaS capital. You’ll want to talk with an expert if you believe SaaS capital could be what you need.

  • Exit Strategy May Be Required

SaaS capital lenders often want to know what your exit strategy is. Many SaaS entrepreneurs plan on exiting the business at some point, but if you’re going to run it for life, then this question may be tough to answer. Business Capital Consultants can help you deal with this and other issues, though.

  • Credit Requirements

Despite the attractive SaaS business model, some lenders may like to see established credit history before lending. If your company is still young, getting SaaS capital will be challenging, although not impossible if you work with an expert.

Is SaaS Capital Right For You?

SaaS capital is likely your best option if you have a SaaS business. But there are plenty of Saas capital options to choose from, and you don’t have time to sort through each of them — you have a business to run.

You can leverage Business Capital Consultants’ thorough knowledge of this unique lending space to find the best solution for your needs. We work with an extensive network of lenders that provide capital to SaaS companies, so we can help you find the solution that lets you leverage future revenue for growth in the present.

Schedule your free 30-minute consultation with Business Capital Consultants today.

Business Capital Consultants is here to help if you aren’t sure which short-term financing source is right for you. We’ll deal with the paperwork and phone calls for you so you can get the funding you need without wasting valuable time.

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