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What are the benefits of doing something like this vs. just getting a loan from a bank? If you already have ARR it’s easy to get a loan. A loan seems both more
by iamleppert 6y ago
What are the benefits of doing something like this vs. just getting a loan from a bank? If you already have ARR it’s easy to get a loan. A loan seems both more flexible and cheaper than this.
- texasbigdata 6y agoAssumes you can get a loan, and that the cost of capital of said long won't have an equity like instrument attached as a "kicker". Think SVBs venture debt and the 0.25% warrant attached to sweeten the return. Also covenant package, personal guarantee, etc.
- Dirlewanger 6y agoI imagine startups don't do traditional loans because a bank will probably take one look at them and attach an sky-high interest rate due to the risk profile, if they even decide to lend at all. Also, if said startup has other investors, I don't know if they'd approve of them using their funds to pay off debt instead of using it to grow the company.
- andygcook 6y agoMost standard bank loans won't give money to SaaS companies because they don't have physical assets to back up the loan and the founders won't make personal guarantees. SVBs venture debt is really only available to venture-funded businesses that are likely to raise another round. There are specialized lenders now though that know how to properly vet and value recurring revenue: Lighter Capital Clearbanc Capchase Flywheel by HustleFund And many, many, others.