Lighter Capital stands out as a leading Revenue-Based Financing (RBF) solution, particularly for SaaS companies. Offering up to $4 million in financing, Lighter Capital is unique in that it doesn't require personal guarantees, covenants, or the surrender of equity and board seats.
However, SaaS entrepreneurs often seek alternatives, especially when facing longer approval times or not meeting Lighter Capital's prerequisites, such as a minimum monthly revenue of $15,000 or ARR of $200K. Additionally, the funding process can span up to a month, and the rapid repayment of loans might adversely affect business metrics.
Recognizing the need for more flexible and quicker funding solutions, this post delves into the top three alternatives to Lighter Capital: Ratio, River SaaS Capital, and Founderpath. Our comprehensive analysis aims to provide you with the insights needed to make informed decisions that best suit your company's needs.
Lighter Capital — Detailed Review
Lighter Capital is designed for SaaS and Tech companies. It provides non-dilutive growth capital without the need for ownership or personal guarantees.
With flexible financing up to $4 million, qualifying businesses (generating at least $200k in yearly recurring revenue or $15K MRR from a broad revenue base) can get the funding while preserving complete ownership and control.
Beyond financial support, Lighter Capital offers additional perks such as discounts, networking opportunities, and resources to help businesses scale effectively. Their application process for requesting capital is intended to be quick and open, avoiding the prejudices that are commonly associated with traditional equity fundraising.
Financing cap
Up to $4 million
Eligibility criteria
- Companies should have headquarters or subsidiaries in the United States, Canada, or Australia.
- The company should generate an MRR of more than $15,000 or an ARR of $200K
- Gross margin should be over 50%.
- Profitability or positive cash flow is not required. However, a varied customer base is preferable.
Process
Lighter Capital has these 4-step working processes:
Step 1: Fill out an application, which usually takes 3 minutes, by answering a few questions about your company.
Step 2: Next, you need to meet with an investment advisor to discuss your financial requirements and assess qualifications. Here, you can also compare Lighter Capital to alternative capital sources.
Step 3: Connect your financials to establish the optimal financing plan, your qualification amount, and the process requirements to complete the process.
Step 4: Understand your payment plan and get information on the deposition of funds, which usually takes a few days.
Communication and support
Lighter Capital provides email and phone support. Apart from that, it also has a Slack community where you can connect with other founders and like-minded CEOs, as well as use our partner services and discounts to scale strategically.
Requirement of Personal Guarantee
Lighter Capital doesn’t require you to sign personal guarantees, warrants, or covenants.
Restrictions on Usage of Funds
Lighter Capital gives you unrestricted capital for growth in return for a small percentage (2%-8%) of monthly revenues.
Expertise in Funding SaaS Businesses
Lighter Capital is focused on the SaaS business. Since 2010, Lighter Capital has helped over 500 startups expand by facilitating more than 1,000 rounds of funding and providing over $300 million in non-dilutive financing. Over 20% of portfolio customers have been acquired by companies such as Amazon, Salesforce, and Eventbrite.
Geographical Limitations
Yes, Lighter Capital does have geographical limits on who can apply for funding. To apply, your company must be based in Australia, Canada, or the United States or have a subsidiary there.
Integrations
Lighter Capital doesn’t offer integrations. However, it offers exclusive discounts to its clients on software such as HubSpot, Stipe, Ramp, etc.
Additional Resources
Lighter Capital offers two calculators:
This calculator can be used to estimate the valuation of a company.
This calculator can be used to compare what happens when you sell equity to grow versus using founder-friendly debt financing and learn what equity dilution could cost you.
3 Promising Lighter Capital Alternatives
Lighter Capital is a good RBF solution, however, due to its geographical restrictions and high eligibility criteria, SaaS entrepreneurs tend to go for alternatives to Lighter Capital.
So here are the top 3 alternatives for you to choose from:
- Ratio
- River SaaS Capital
- FounderPath
Ratio Boost and Trade offer flexible financing for SaaS and hardware growth, with Boost providing Buy Now Pay Later (BNPL) plans. Ratio sets itself apart by offering true-sale based financing through Trade.
River SaaS Capital provides non-dilutive term loans targeted to SaaS companies' specific cash flow needs, with a minimum MRR of $150k required to qualify.
Founderpath enables SaaS creators to transform monthly subscriptions into instant cash without sacrificing equity, with repayment terms ranging from 12 to 48 months and integration with banking platforms.
Let’s review each of them in detail:
1. Ratio
Ratio turns your recurring revenue contracts into immediate cash. With Ratio on their side, SaaS and hardware companies can get upfront capital without diluting or adding debt to their balance sheets — allowing them to focus on growth without worrying about capital.
It's simple, quick, and tailored to your specific business requirements.
Ratio offers two product options, Boost and Trade, to meet the different demands of businesses.
Key Differentiators
- Access to huge capital ~$400M credit facility for customer financing
- Option of selling future contracts for upfront cash with Trade without involving your customers.
- Embedded finance for winning more customers and lowering the CAC (customer acquisition cost) via Boost.
- With Ratio Trade, sellers can select contracts for sale depending on their specific needs.
- Seamless integrations with payment, banking, and accounting systems ensure no disruptions in your sales workflows.
- Robust safety measures provide effective privacy protection, such as network traffic encryption with TLS v1.3 and RSA-2048.
- 'Robotics-as-a-Service' model facilitates meeting the demand for subscription-based payments in the capital-intensive sector.
Ratio Boost
Ratio Boost increases deal-closing chances by enabling you to offer BNPL flexibility to your customers. By offering tailor-made payment options, Ratio Boost helps overcome customer budget constraints, significantly reducing the risk of delayed or lost deals.
Ratio pays you the total contract value upfront while receiving payments in installments from your customers as per the selected payment plan. Moreover, Ratio Boost flawlessly merges with your existing sales workflow, including your website, CRM, and CPQ systems.
Best of all, you have the flexibility to manage the financing cost. Choose to cover it yourself, pass it on to your customers, or share the burden. With Ratio Boost, the choice is yours.
- Seller pays: In order to keep customers happy, the seller may cover financing charges.
- Buyer Pays: This allows Ratio to manage balance sheet risk while still providing customers with payment flexibility.
- Split 50/50: The seller can balance cash flow constraints and customer retention by splitting fees with buyers. The fee structure can be tailored to the seller's situation.
How Does it Work?
Ratio Boost works in 5 easy steps:
Step 1: Fill out the Ratio registration form with your business information.
Step 2: Receive approval within 48 hours, depending on credit risk, willingness to pay, and a desire to expand and integrate Boost into your sales system.
Step 3: Offer Personalized Buy Now, Pay Later plans to your customers at the point of sale.
Step 4: Receive upfront capital from Ratio while your customers pay when it is most convenient for them.
Step 5: Replace stressful and manual billing with automated reminders for due and overdue payments to your customers.
Benefits
Ratio Boost will help you accelerate your revenue and provides the following benefits:
- Quick Cash Access: Receive funds almost instantly, ensuring a swift response to financial needs.
- Contract Flexibility: Choose contracts that are tailored to your cash flow needs, allowing you to create a personalized financial strategy.
- Dynamic Risk Assessment: Take advantage of Boost's dynamic underwriting, which assesses risk based on your organization's specific elements.
- Affordable and Convenient: Choose a flexible funding option with no fixed interest rates, allowing you to adapt repayments to your monthly income and financial situation.
- Full Ownership: Maintain complete control over your company without the risk of share dilution.
Ratio Trade
Ratio Trade enables businesses to convert annual and multi-year contracts into immediate cash without incurring debt or diluting shares.
With Trade, you gain approval in less than 48 hours, and as soon as you accept the offer, you instantly get the capital in your bank account.
How Does it Work?
Ratio Trade works in five simple steps:
Step 1: Use the Ratio Portal to integrate your banking, financial, and billing systems.
Step 2: Ratio will assess your submission and respond with an approval or rejection within 48 hours.
Step 3: Submit your annual or multi-year contracts to the portal.
Step 4: Ratio provides an indicative cash offer for each contract.
Step 5: Accept the offer to have funds credited to your account.
Payment Terms
Ratio charges a discount rate ranging from 1% to over 15% on the contract value. The discount rate is determined by the length of the contract, level of risk, and advance repayment schedule.
For example, a 15% rate on a $1,000,000 contract results in an upfront payment of $850,000 to the client.
Benefits
Ratio Trade provides SaaS and hardware companies with a variety of expansion opportunities. These opportunities include:
- Flexible Payment: Pay only after receiving payments from customers
- Automated Reporting: Using this platform to streamline cash reporting saves time and improves overall corporate operations.
- Extended Runway with Deferred Payments: It allows for up to 12 months of deferred payments, which improves cash flow management and facilitates long-term planning.
- Debt-Free Cash Access: Trade provides rapid cash access without incurring debt, giving you more financial flexibility.
Integrations
Ratio integrates with your systems to enable quick approval and onboarding. It supports various integrations, including:
- Banking- Plaid
- Payments - Recurly, Stripe, Chargebee, Chargify
- Accounting - FreshBooks, QuickBooks, QuickBooks Desktop, KashFlow, ORACLE NETSUITE, Xero, Sage Business Cloud, Sage 50cloud, Clear Books, FreeAgent
Additional Resources
Ratio offers two calculators for the ease of decision-making:
- Funding Comparison Calculator
This calculator streamlines the process of calculating and comparing different funding options for a customer contract you want to sell.
- Cash Flow Simulator
This calculator calculates how much cash you can receive from Ratio in exchange for long-term contracts.
Must Read: 5 Compelling Reasons for B2B SaaS Firms to Opt for Revenue-Based Loans
Ratio Vs. Lighter Capital — Which One is Better?
Got some questions? Check out our FAQs page!
2. River SaaS Capital
River SaaS Capital offers alternative venture financing for developing SaaS businesses, with swift and flexible solutions tailored to your specific needs and cash flow. They provide non-dilutive term loans for emergency finance, as well as equity alternatives that are matched with long-term growth objectives.
Loans vary from $500k to $1.5 million (usually MRRx4) for new customers and up to $4 million for established customers. Qualification requires a minimum MRR of $150k (or $1.5 million ARR), a SaaS business model, and a US brand.
Key Differentiators
- Revenue-Based Financing: They use revenue-based financing, allowing you to retain business ownership while securing funds.
- Varied Financing Solutions: Offers term loans, revenue-sharing agreements, and hybrid models.
- SaaS Market Expertise: Deep knowledge of the unique challenges and opportunities in the SaaS sector.
Payment Terms
Funds are typically structured as 36 or 48-month term loans with monthly principal and interest payments, although other options exist, such as interest-only and revenue sharing on post-investment earnings.
Benefits
• No prior investment is required.
• Compatible with current stock investments.
• Profitability and an exit strategy aren't required.
• Flexible tranche options are available.
Integrations
River SaaS Capital doesn’t offer any integrations.
3. Founderpath
Founderpath enables SaaS founders to easily turn monthly subscription revenues (MRR) into instant cash, providing a non-equity financing solution. Founders initiate the process by integrating their bank accounts and necessary data to create a credit score, which determines the amount issued, with higher scores resulting in cheaper interest rates.
As a debt fund, Founderpath invests directly in startups, focusing on bootstrapped SaaS businesses with a minimum MRR of $10,000 and ARRs ranging from $1 million to $5 million.
Key Differentiators
- SaaS founders with revenues ranging from $100k to $10m can access up to $5 million overnight for rapid growth.
- Founderpath does not ask founders to give up any equity in exchange for investment.
- There are no costs for using the Founderpath platform.
- Unlike traditional banks, Founderpath does not impose funding covenants.
Payment Terms
Founderpath allows founders to repay their investment over a period of 12 to 48 months with no prepayment penalties or warrants. Typical terms include $500,000 paid back over a 24-month period at a 7-12% discount rate.
Benefits
- Provides a payback period of 12 months or longer for flexible repayment.
- Funding without warrants, covenants, or personal guarantees for a straightforward, low-risk deal.
- No hidden or upfront fees, ensuring clear and predictable finances.
Integrations
Founderpath integrates with QuickBooks, Chargebee, Paddle, and ProfitWell.
Ratio - A Trustworthy Choice
Ratio stands out as a trustworthy choice compared to its peers like Lighter Capital, River SaaS Capital, and Founderpath, thanks to its comprehensive approach, substantial funding capacity, and user-friendly interfaces.
Ratio offers Revenue-Based Financing (RBF) through Boost, which allows your business to attract more customers owing to the BNPL facility. This feature integrates smoothly into sales workflows, simplifying payment handling. Additionally, the financing costs can be shared between sellers and buyers, with Ratio taking on the underwriting risk.
Moreover, Ratio offers true-sale based financing through Trade, enabling firms to convert future contracts quickly into immediate cash without affecting the balance sheet.
Experienced team, transparent communication and thorough compliance makes Ratio a reliable partner, whether you pick Boost or Trade. Their intuitive interfaces streamline funding requests, enabling quick approval and facilitating business growth.
To explore these financing opportunities, businesses can register on the Ratio’s App for free and unlock their financing potential.
