If You Have SaaS Traction, Opening a Venture Debt Line of Credit is Great Right Now for These Reasons

We hit $1mm ARR in April 2014. Up until that point, our financial goals had been “surviving”, “getting to cash flow positive”, and “hitting that $83.3MRR mark” (in that order).

Once we got there, it was time to start planning for $10mm. We raised a seed round of $800k two months later and secured a $1.5mm venture debt line of credit from Square 1 bank.

The line of credit was and is still super valuable to our business. Here’s why:

1. It was easier to secure than our equity rounds.

These banks do a lot of deals. They know what they want and make it easy for you get evaluated. As long as you have strong traction in a solid market, they’ll be interested. They don’t have to worry about valuation or ownership percentage and can move quickly.

2. Interest rates are at an all time low right now.

It’s basically the cheapest money you can find. Get it while the getting’s good :)

3. It gives you leverage for your future equity rounds.

Having a line of $1.5mm put us in the driver seat for negotiating our series A. When sitting across the table with investors, it’s great to be able to truly say “we don’t need the money but would like to only do it if we find the right partner and the deal dynamics make sense.”

I’m a big fan of venture debt and recommend Zack Mansfield at Square1 bank if you’d like an intro. There is little downside going the venture debt route and recommend growing business explore it for their venture journey.

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