Venture debt is a favored financing option for many SaaS companies, but it’s important to understand the venture debt terms related to warrants in order to make the right decision for your business.
As the venture capital and equity field continues to stall and competition grows for deals, motivated SaaS entrepreneurs are seeking alternative financing methods to fuel their growth. Venture debt is faster and more flexible than the alternatives, and can be paired with existing or future equity financing for expanded flexibility. This funding option can equip you with the resources you need to grow now and continue to mold to your needs in the future so you feel supported at every stage.
Though each debt option differs based on your needs and provider, there are two central choices: dilutive or non-dilutive. Learn more about the terms of each agreement and how to choose the right financing option for you.
Venture Debt Terms: Breaking Down the Options
Non-Dilutive Venture Debt
When you choose a financing option that is 100% non-dilutive, you will maintain shares of your business at every stage. Unlike equity financing, you won’t be expected to trade equity for resources, and you take the funds out in the form of a loan instead. The advantage of this option is that it leaves ownership control within your hands, which some SaaS companies find important, particularly within the early stages of growth. Down the line with some companies, you may choose to take out equity financing as well, but the venture debt terms of your original agreement will not include anything like a warrant to be used by your provider.
Warrants allow your financial lender to purchase equity shares during an agreed-upon period. Some loan providers require warrants to be present, but at River SaaS Capital, we can provide warrant-free financing to those who prefer it. This puts the power back in your hands: should you require non-dilutive financing, you can choose this type of venture debt with a trusted provider and maintain full control.
Dilutive Venture Debt
With dilutive debt financing, you still take out your funds in the form of a loan but enter an agreement that includes warrants, covenants, or convertible notes in order to allow the purchase of equity down the line. This means that while agreements may start without diluting your equity, there’s a chance that your provider will purchase shares at some point based on the venture debt terms outlined in your agreements.
As stated, a warrant allows lenders to purchase equity down the line at a set price. With a convertible note, borrowers enter a short-term agreement that begins with a loan and can evolve into the purchase of a stake within the company. This is commonly used in the start-up stage. There are many options for dilutive venture debt terms. If you’re in the position to release equity shares to secure more strategic financing, these options can blend the benefits of a debt-based approach, like its speed to impact, lowered competition, and enhanced flexibility, with the benefits of an equity deal. This option is ideal for organizations ready to embark on equity deals who want to pursue a more strategic debt-based choice instead.
Not sure which is right for you? We’re here to help. Talk to our team today about your needs and we’ll help you discover the best financial options for your growth.
Enjoy Flexible Debt Solutions with River SaaS Capital
At River SaaS Capital, we work hard to ensure our clients can grow their own way with the tailored financing solutions they need. We offer both warrant and warrant-free options so no matter your preference, you can count on our fast, flexible financing to deliver. With our non-dilutive, warrant-free financing, you can avoid further relinquishing company shares while still receiving the necessary funding to grow your business. With our warrant options, you can work with our team to build the best plan to support your needs and ensure a clear understanding of the terms beforehand.
Our tailored approach extends beyond whether your deal has warrants — we also offer a variety of strategic financing options to structure your venture debt terms, including traditional loans, interest-only options that allow you to put more revenue back into your business, and step-up structures with payments that grow as you grow based on agreed upon milestones. Our team is genuinely invested in your growth and we’re here to offer tailored support, growth insights, and GtM strategies to help you elevate your company to the next level.
We’re proud to have supported some of the brightest minds in the SaaS industry over the years with the tailored financing they needed to succeed. Talk to our team today to explore your needs and learn how we can fuel your growth.
