Why SaaS founders should use their recurring revenue to acquire upfront working capital

Afshan Qureshi
Afshan Qureshi
Content Marketing Manager
Posted on
March 28, 2022
min read
Why SaaS founders should use their recurring revenue to acquire upfront working capital

SaaS companies with subscription models (recurring revenue models) know the pain of getting accounts receivable cleared up and full payment for services on your balance sheet.

However, there’s gold in those subscriptions. Since you already know what your monthly recurring revenue (MRR) will be for each subscription, you can forecast your annual recurring revenue (ARR) based on that figure. Then, rather than wait to be paid in full by each customer, you can take that revenue forecast to a non-dilutive financing partner like Capchase. You can get that predicted revenue paid up front instead, with lots more operating capital to run (and fund) your SaaS business.

As we shared in a previous post, there’s really no reason for founders to worry about bridging cash flow gaps or going into multiple rounds for VC capital. Instead, use your predictive MRR or ARR to get upfront working capital or growth funding—without giving away equity in your company.

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Why SaaS founders should use their MRR or ARR to acquire upfront working capital 

With non-dilutive, upfront working capital or growth funding, you can use the money to compete more effectively in several critical operation areas. Think of these benefits as spokes of the same business growth ignition wheel.

1. Ramp up hiring

Being able to staff up nimbly is so critical as your SaaS startup gains traction (and subscribers). Having enough qualified employees on staff to create and refine your software products and deal with customer service is a key to growth (and applies to any organization).

2. Develop or buy the tools you need to enhance your platform (and products)

Building out your SaaS with more automation, management solutions, data analytics, and other tools of the digital trade will help you add value to your customer—and get more revenue from them in turn. You won’t waste valuable time going to a traditional lender to try and get the money you need. You won’t give up a stake in the SaaS business. And you’ll have the working capital to improve your business and develop more satisfied clients who are happy with their subscription. Bonus: those clients are likely to renew (ensuring more ARR in the future).

3. Increase investment in product development

Investing in product development will help you grow your SaaS business more quickly than what you can do waiting for your revenue to roll in. Getting non-dilutive financing based on your recurring revenue steps up the pace significantly for getting dollars behind new products. New products = keeping current customers longer through upselling opportunities and the ability to attract significantly more/higher $ value customers.

4. Increase your marketing budget

SaaS founders operate in a highly competitive industry and they market to prospects in a very crowded space. You need a generous marketing budget to reach your target users, develop your sales funnel, and stay ahead of the competition.

Ignite growth with non-dilutive funding from Capchase

As your early-stage company moves out of startup mode into growth mode, you have a subscription base to work from—and from which to base your ARR. Mine the gold in that recurring revenue with Capchase. We’ll arrange non-dilutive financing based on your subscriptions to get you the funding you need, fast. Even better, you don’t give up a cent of equity by using this alternative to VC financing.

Register for an account so we can review your financials and see how Capchase can help you maintain your competitive edge and help turbocharge your SaaS company’s growth by leveraging your predictable recurring revenue within 24 hours of your application.