Magali Rosenvit
Magali Rosenvit
New Business & Strategy
Posted on
August 4, 2022
·
0
min read

Resources to navigate the downturn and preserve your runway

Resources to navigate the downturn and preserve your runway

What can you do if your runway is falling short, even if you’ve already reduced your SaaS company’s burn rate to the minimum?  We’ve gathered a list of government resources across the US, UK and Spain that you could use to support your business’ runway and navigate the downturn.

In recent months, the economic context has changed dramatically, and it will be increasingly difficult to raise money in the next 12-18 months at a fair valuation. In that same line of thought, VCs are recommending that companies increase their runway to 18-24 months if possible, to avoid the difficulty of equity rounds in this particular context.

What is cash runway?

With the current economic climate, SaaS companies need to know exactly what their cash runway looks like. In simple words, cash runway is the amount of time (in months) your company can survive without raising additional funds.

Formula:

Cash runway = Total Cash/Burn Rate where your burn rate is your cash expenses minus cash revenues.

So for instance, if you have 100.000 USD in your account and you are burning 10.000 USD a month, your cash runway is 10 months. In other words, without raising additional funds, your company can survive 10 more months. This metric is particularly important for start-ups as it gives you input on whether your company is overspending. A short runway suggests that for your company to survive, you need to either increase cash or decrease your expenses.

Resources to increase your cash balance

One option for SaaS companies is to upfront future cashflows with non-dilutive capital. SaaS companies have an advantage when it comes to their most important asset: recurring revenue. This can ​​easily be turned into flexible growth capital with growth financing partners like Capchase.

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Other options may include applying to government programs that increase your cash position. We’ve sorted through the top options for you, so that you have everything you need to know in one place.

United States

1. The 7(a) Loan Program

Description:

Financial help for small businesses with special requirements. This is the best option when real estate is part of a business purchase, but it can also be used for:

  • Short- and long-term working capital
  • Refinance current business debt
  • Purchase furniture, fixtures, and supplies
  • The maximum loan amount for a 7(a) loan is $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. Your lender will help you figure out which type of loan is best suited for your needs.

Eligibility:

  • Operate for profit
  • Be considered a small business, as defined by SBA
  • Be engaged in, or propose to do business in, the United States or its possessions
  • Have reasonable invested equity
  • Use alternative financial resources, including personal assets, before seeking financial assistance
  • Be able to demonstrate a need for a loan
  • Use the funds for a sound business purpose
  • Not be delinquent on any existing debt obligations to the U.S. government

More information

2. 504 loan program

Description:

The CDC/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets that promote business growth and job creation.

504 loans are available through Certified Development Companies (CDCs), SBA's community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.

Eligibility:

  • Operate as a for-profit company in the United States or its possessions
  • Have a tangible net worth of less than $15 million
  • Have an average net income of less than $5 million after federal income taxes for the two years preceding your application

More information

3. Microloan

Description:

The microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.

Eligibility:

Each intermediary lender has its own lending and credit requirements. Generally, intermediaries require some type of collateral as well as the personal guarantee of the business owner.

More information

4. PPP loan forgiveness

Description:

Borrowers who received a PPP loan prior to the program closing on May 31, 2021 have already reached the end of their covered period and can apply for forgiveness now. Reach out to your lender now if you haven’t heard from them regarding forgiveness.

Eligibility:

A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.

More information

5. State trade expansion program (STEP)

Description:

The STEP grant program has helped thousands of small businesses obtain grants and find customers in the international marketplace since 2011. Through awards to U.S. states and territories, STEP helps small businesses overcome obstacles to exporting by providing grants to cover costs associated with entering and expanding into international markets.

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6. SBIR and STTR

Description:

If your small business is engaged in scientific research and development, you may qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. These programs encourage small firms to undertake scientific research that helps meet federal research and development objectives and have high potential for commercialization if successful.

More information

UK

1. SMART (Innovate UK)

Description:

Smart is Innovate UK’s ‘open grant funding’ programme.

Innovate UK, part of UK Research and Innovation, is investing up to £25 million in the best game-changing and commercially viable innovative or disruptive ideas. All proposals must be business focused.

Eligibility:

Your project must:

  • include at least one micro, small or medium-sized enterprise (SME) as the lead or a collaborative grant claiming partner
  • start by 1 April 2022
  • end by 31 March 2025
  • follow specific rules dependent on its duration
  • carry out your project work in the UK
  • intend to commercially exploit the results from or in the UK

If your project’s duration is 6 to 18 months:

  • it must have total eligible project costs between £25,000 and £500,000
  • it can be single or collaborative

If your project’s duration is 19 to 36 months, it must:

  • have total eligible project costs between £25,000 and £2 million
  • be collaborative

More information

2. Small Business Research Initiative (SBRI)

Description:

SBRI supports a range of competitions with public sector organizations and departments. SBRI runs multiple innovation grants for different industries. Each has its own eligibility criteria

More information

3. UKRI’s Innovation Grants

Description:

UKRI funds businesses to develop innovative products, processes, or services. Businesses of any size can apply for funding, as long as they’re based in the UK. Funding ranges from £25,000 to £10 million.

More information

4. Future Fund- breakthrough

Description:

Breakthrough is a £375m UK-wide scheme which will encourage private investors to co-invest with government in high-growth, innovative firms.

Eligibility:

  • £375m initial fund size
  • Focused on R&D intensive companies
  • Minimum investment round size of £30m
  • Must be a UK based company with significant UK operations
  • Application to be led by established venture capital investors

More information

5. SME R&D Tax relief

Description:

SME R&D relief allows companies to:

  • deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
  • claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

More information

Spain

1. Enisa

Description:

Financial support for small and medium-sized companies that want to promote their innovative entrepreneurship projects. It has different lines of financing (Young entrepreneurs, entrepreneurs, growth, etc.) with different eligibility criteria.

More information

2. ICO

Description:

ICO is the official credit public entity that works towards boosting digital growth. They fund up to 12,5 M euros in one or various operations

More information

3. Innovfin

Description:

InnovFin provides loans, guarantees and equity-type funding, tailored to innovators’ needs. Financing is either provided directly or via a financial intermediary, usually a bank or a fund. InnovFin is available across all eligible sectors in EU Member States and Associated Countries

More information

4. Neotec

Description:

Neotec Program finances the start-up of new business projects that use technologies or knowledge developed from research activity, and in which the business strategy is based on the development of technology.

More information

5. Innvierte

Description:

In 2019, Innvierte started a new initiative to promote the capitalization of technology-based and innovative companies located in Spain. Innvierte accompanies professional private investors, previously approved by Innvierte, in investment rounds, to whom it delegates the management of the investee companies

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