Canadian SaaS Finance
SaaS, or Software as a Service, relates to companies that provide a cloud-based service that enables user-access to software applications online.
Canadian SaaS funding is designed to support companies who typically have an end customer (business) who purchases Software, on a subscription basis, hosted via an application made available to its users over the internet.
Table of Contents
What is SaaS Finance and is this right for my business?
SaaS finance refers to financing options that are specifically designed to assist startup and scale-up efforts for software as a service (SaaS) businesses. Measuring finance for SaaS companies comes down to a few key metrics such as:
- 1. Committed Monthly Recurring Revenue (CMRR)
- 2. Cash Flow
- 3. Customer Acquisition Cost (CAC)
- 4. Customer Lifetime Value (CLTV)
- 5. Churn and Renewal
SaaS financing - What is it?
SaaS financing offers non-dilutive capital investment. It gives tech-enabled businesses seamless access to growth capital, to be repaid in line with a companies’ future sales. This is a revenue-based funding solution that grows as your business grows. SaaS financing is not technically a loan, so a personal guarantee is not required. It has no impact on your company’s credit score and there is no interest. Instead, it is a capital investment at a fixed price, and your business retains 100 percent equity.
Repayments are taken as a percentage of revenue. So when the business is not making as much money, repayments are lower, and when times are good, your repayment window shortens.
SaaS financing - Why should I consider it?
Canadian SaaS companies with subscription models (recurring revenue models) know the problems of getting accounts receivable cleared up and full payment for services on your balance sheet. But, since you already know what your monthly recurring revenue (MRR) will be for each subscription, you can forecast your annual recurring revenue (ARR) based on that figure. Then, rather than wait to be paid in full by each customer, you can take that revenue forecast to a non-dilutive financing partner. You can get that predicted revenue paid up front instead, with lots more operating capital to run (and fund) your SaaS business.
Canadian SaaS businesses taking advantage of high-growth finance solutions with Asgard typically are:
- • Subscription-based
- • Tech-enabled
- • High-growth trajectory
- • Early stage
- • B2B
What can I use the funds for?
For the most part, SaaS funding in Canada is non-restrictive, meaning that you can use the money for any business purpose. What would your priority be?
- • Finance customer acquisition costs
How it works
Getting started in easy: Simply register and access your personal dashboard to manage your funding and savings performance and metrics.
Get matched to funding opportunities: Our technology will match you with all suitable products and suggest the most relevant solutions across loans, equity and grants.
Monitor your spending, cut costs and build savings: Simply integrate your bank account to access an instant expenditure and savings report – start to cut costs immediately.
Apply easily with our Asgard review process: Keep updated with changing circumstances and easily submit your applications to relevant funding and savings providers.
What is SaaS financing?
What types of business can apply?
SaaS financing is available to Canadian tech-enabled businesses that have an online proposition and receive subscription or contracted payments for services. If your business doesn’t quite match this, but you receive card payments you may be eligible for a merchant cash advance, which is a slightly different solution. Register with Asgard to speak to one of our Toronto-based Funding Managers to discuss your options.
What can I use the funds for?
What does SaaS stand for?
SaaS stands for ‘Software as a Service’. It refers to technology companies that maintain computer servers to host proprietary software applications in the ‘cloud’. Customers access these applications via the internet.
SaaS customers do not buy these applications outright. They rent them. Usually paying a monthly subscription fee to use the application. Some subscriptions are a flat fee, others may be based on how much data can be stored, or the number of users who may access the applications, or the level of service desired.
Why are SaaS companies different?
SaaS companies differ from most other businesses because they do not sell a product that the customer may own or offer a service that fulfils a single task. SaaS organisations create software solutions to a problem or need and then rent the software to users on a rolling basis. SaaS companies typically refer to their customers as ‘members’.
The core worth of SaaS organisations is set in the effectiveness of their applications, the number of members they have, and the value of future membership fees. Because many SaaS companies experience a high ‘churn’ rate – members joining and quitting – they must continually pursue new users to replace those who cancel their membership. They usually do this through a mix of software development to make their applications more desirable to more customers, and intensive marketing to leverage current members and extract more fees per user in exchange for enhanced service features.
What are the advantages of SaaS?
The main selling point of SaaS organisations is the central management and development of their applications. Customers do not have to buy and install software on their local systems or replace or upgrade as applications become out of date. Because users have direct access to the applications via the cloud, it is generally viewed as being more efficient and economical than ‘purchase to own’ alternatives.
Key benefits of SaaS include:
- Economical: No large upfront payment, subscription spreads cost over time.
- Mobility: In theory, users can access the software anytime from anywhere.
- Easy updates: Central management of the software saves users having to install new versions of the application as the old ones become obsolete.
- Scalability: If the customer needs more services, or wants to add more users to its membership, it simply pays a higher subscription.
- IT expertise: SaaS companies invest heavily in developers and IT specialists – giving users access to a large knowledge pool they probably could not assemble or afford themselves.
What are disadvantages of SaaS?
The biggest disadvantage of SaaS companies is the infrastructure that houses the applications members pay to use. Due to the high cost of construction, maintenance, and the massive energy supply required to run large networks of computers, many SaaS businesses outsource this need to supplier data centres. This means the SaaS provider does not actually control the hardware that hosts the software they sell – leaving the SaaS company vulnerable to outages they cannot fix, scalability issues, and the financial strengths or weaknesses of the data centre.
Key issues of SaaS include:
- Downtime: If the data centre has a problem, then the SaaS company has a problem – which means their members have a problem that can easily cascade.
- Pricing: SaaS businesses must pass on costs through subscription fees. Users may find it hard or impossible to step out of a long-term contract even if their fees are rising fast.
- Inflexibility: Users who wish to downsize their membership may find they cannot do so until a lengthy notice period has passed.
- Security: Third party data centres are housing user data. Security effectiveness can vary wildly, with the potential to expose the SaaS company and their users to data breaches and loss.
- Financial strength: SaaS applications are only as strong as the SaaS company managing them. If they become insolvent, the application may cease to operate, leaving users without an alternative or access to their most important information.
What's an example of a SaaS product?
SaaS has the potential to solve many types of business need. Some of the most popular uses include:
- • Accounting and invoicing.
- • Human resources – workforce management and recruitment.
- • Customer resource management (CRM) – handling customer and sales information.
- • Project management.
- • Marketing and networking.
- • Web hosting and ecommerce.
- • Data management.