Recurring revenue finance software, sometimes referred to as programmatic financing, facilitates short term loans, usually one to two years, to high growth start-up SaaS and e-commerce companies with annual recurring revenue (ARR). This type of loan differs from traditional funding because instead of raising funds by selling and diluting ownership in a company, owners are able to borrow money against their recurring revenue without losing stake in the company.
Typically, recurring revenue finance software integrates with a company’s banks, accounting, and payment systems to get a real-time view of financial performance, expenses, ARR, and where money is being spent. Once the data is analyzed, the software provides a loan amount and either an interest rate or a percentage of future subscription fees that will be paid to the lender. These loans provide more cash flow for scaling companies to spend on areas such as sales, marketing, or to pay vendors early for greater discounts.
Recurring revenue finance should not be confused with venture capital management software, which helps VC’s manage their investments and capitalization tables to break down a company's percentages of ownership, equity dilution, and value of equity in each round of investment.
To qualify for inclusion in the Recurring Revenue Finance category, a product must:
Provide an underwriting platform that analyzes various financial data to provide a loan amount and interest rate
Allow for reporting and analytics on key business metrics, such as performance, revenue, cash on hand, and expenses
Provide a user dashboard which displays the funds a company is eligible for, funds available, and funds used
Integrate with a company’s existing tools, such as banking platforms, accounting software, and expense management software
