Top Funding Options for Growing Your SaaS Business in 2025

Software-as-a-Service (SaaS) companies have transformed how we work and do business, with the numbers to back it up. As of 2022, the global SaaS market was worth around $3 trillion, according to McKinsey & Company.

Whether you want to start a SaaS company or want to expand what you’ve already built, you might need financing to stay afloat or take things to the next level. Founders have various funding options, including SaaS loans and other financing options.

What Are SaaS Loans?

SaaS loans are a financing tool that can help Software-as-a-Service companies with funding. Founders can consider different types of SaaS loans and other financing options to secure capital.

Types of SaaS Loans and Financing

Term Loans

SaaS loans may be structured as term loans, where borrowers receive a lump sum upfront. The loan amount is then repaid over a specific period or term. Typically, term loans are good if you need growth capital to level up your business.

Whether you’re doing product development, hiring more team members, or launching your next marketing campaign, term loans provide the financing to make it happen.

Many term loans come with fixed interest rates, so your rate and monthly payment won’t change over the course of repayment. That fact alone makes them a good option for SaaS founders who thrive on predictability and can easily budget for the monthly payments.

Revenue-Based Financing

As a SaaS founder, you know that things can change month-to-month, even day-to-day. That can have an impact on both your annual revenue and your cash flow. When looking at SaaS financing, one option to consider is revenue-based financing.

As the name suggests, the financing is tied to your revenue. You get the capital you need and have flexible payments based on a percentage of your future business revenue. So instead of fixed terms and a set schedule, your monthly payments are based on a portion of your estimated future receivables.

Venture Capital

Depending on the type of SaaS company you have, you could turn to venture capital for funding. Venture capital firms provide financing for tech startups. Typically, it can be a substantial investment in exchange for an equity stake in the company.

Securing venture capital can be an alternative to getting SaaS loans. However, raising venture capital can be incredibly challenging and competitive. In fact, the percentage of startups that get venture capital is less than 1%, according to Forbes.

If you’re lucky enough to get venture capital, you can get much-needed support, access to industry experts, and financial resources. But you also bring in investors to your business that you must be accountable to, on top of giving up a portion of equity.

Business Lines of Credit

SaaS loans can help funders with upfront capital to help manage cash flow. But depending on your business needs or which stage you’re at, you might need something with more flexibility.

A business line of credit can be a useful alternative to a traditional loan. Instead of a one-time influx of cash, you can draw from a credit limit like you do with a credit card. The way it works is that a bank or financial institution extends a line of credit to you as a borrower for a specific amount.

You’re allowed to draw from those funds, and only up to the amount you need. When you repay what you’ve borrowed, you can access more of your available credit. If you’re in the growth stage right now, putting all of your focus on getting new customers, a business line of credit can be a good short-term financing solution.

Bootstrapping

An alternative to SaaS loans is bootstrapping. Founders that bootstrap their companies typically reinvest revenue and any profits back into the business and may use personal savings to kickstart the company.

On the one hand, bootstrapping your business can help you avoid taking out any debt. Plus, you retain one hundred percent ownership in your company. On the other hand, it can deplete your funds fast and limit your ability to scale quickly. You might be saving money, but losing time. When considering bootstrapping vs. taking out SaaS loans, consider your business goals and your current financial picture. If you have the credit to qualify for financing, it may help you invest in the growth of your SaaS business.

Friends and Family

Founders who are in the early stages can look to friends and family for SaaS funding. However, it’s key to be clear about whether the funds will be a gift, a low-cost loan, or an equity stake in the company. The people in your network can give your company an initial investment to help you create a minimum viable product (MVP) and/or launch the company.

While this may seem like a great alternative to more traditional SaaS loans, friends and family funding has strings attached. If things turn sour, it could have a negative or irreparable impact on the relationship. Before moving forward, make sure to have a solid contract or loan agreement. If it’s a loan, have clear repayment terms, so everyone is on the same page.

What Lenders Look at for SaaS Financing

Founders looking at SaaS loans and financing options will first need to meet the lender’s eligibility requirements. Typically, lenders look at your credit score, time in business, and revenue. But there are other things that SaaS lenders may look at as well. Other businesses may have equipment or other assets as collateral. Since SaaS companies have a different type of business model, lenders may also look at:

• Monthly recurring revenue (MRR): Many SaaS companies have a subscription-based pricing model. That can mean predictable monthly recurring revenue or MRR, which is something lenders look at.
• Annual recurring revenue (ARR): Lenders will also look at your annual recurring revenue or ARR. Lenders like stability and predictability, so both MRR and ARR are metrics they look at.
• Customer churn rate: Lenders will also look at your customer churn rate or the percentage of subscribers that stop using your SaaS over a set period of time.
• Retention: On the other side of that, lenders are also interested in retention rates, which refer to the percentage of customers that stick around as subscribers and continue to use your SaaS.
• Customer acquisition cost (CAC): Gaining new subscribers to your SaaS costs money, and lenders may look at how much money it takes to get a new customer.
• Lifetime value: Lenders may also look at the customer lifetime value (LTV), which refers to the amount of revenue a customer may generate throughout their time as a subscriber to your SaaS.

These various metrics are particularly important for SaaS revenue financing. Whether you are looking for more traditional SaaS loans or other financing options, understand how borrowing will impact your cash flow. While extra funds now can help, you’re also adding additional payments to your business budget.

Get clear on the type of financing that is best suited for your business. Once you confirm the financing option you want, do your due diligence. Research different lenders, look at repayment terms, compare interest rates, and read customer reviews.

Final Thoughts

Whether you’re looking to launch your SaaS company or grow an existing one, you likely need more capital than you have on hand. SaaS loans offer founders upfront capital or access to flexible financing. These funds can help smooth out any bumps with cash flow and provide resources to invest in scaling your business.

FAQs about SaaS Loans

For additional information on SaaS loans, read more for answers to frequently asked questions.

What Financing Solutions Are Available to SaaS Founders?

SaaS founders can look at various funding options to get capital. They can get SaaS loans, such as term loans or other financing tools like revenue-based financing and business lines of credit.

Can Early-Stage SaaS Startups Qualify for SaaS Lending Options?

If you’ve started a new SaaS business, qualifying for traditional SaaS loans can be difficult. Some lenders may have other financing options, but you need to meet the eligibility requirements. Borrowers may face higher interest rates and need to have a personal guarantee.

What Is Non-Dilutive Funding?

Non-dilutive funding refers to a type of financing that allows businesses to keep full ownership. So instead of diluting ownership to receive funding, non-dilutive funding helps entrepreneurs receive funds without sharing a stake in the company.

What Business Loans Can SaaS Companies Get?

Founders can get SaaS loans from banks, credit unions, and online lenders. SaaS loans can be term loans or SBA loans from the Small Business Administration.

What is Equity Financing vs. Debt Financing?

Equity financing is a financing option where business owners get capital in exchange for selling a portion of ownership in the company. Debt financing refers to taking out loans from lenders with a repayment schedule and doesn’t require entrepreneurs to give up any ownership. Capital funding companies may offer either option.

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