# Software and tech startup loans

Source: https://businessloanbroker.ai/industries/software-and-tech-startups/
Site: BusinessLoanBroker.ai (powered by Levr)

> Software companies get funded through venture debt, revenue based financing and SR&ED financing before banks will lend. Amounts, documents and declines.

Software and tech companies get funded most often through [venture debt](https://businessloanbroker.ai/business-loans/venture-debt/) after an equity round, [revenue based financing](https://businessloanbroker.ai/business-loans/revenue-based-financing/) against recurring revenue, and in Canada [SR&ED and grant financing](https://businessloanbroker.ai/business-loans/sred-and-grant-financing/) that advances a tax credit before it is paid. Banks will not lend to a company that loses money and owns nothing a bank can sell, so most startups borrow from lenders who underwrite revenue, investors or government receivables instead.

## Key facts
- **Typical amounts:** Revenue based $50,000 to $5 million, venture debt 20% to 40% of the last equity round
- **Products that fit:** Venture debt, revenue based financing, SR&ED and grant financing, recurring revenue lines
- **Usually decline:** Banks and SBA before profit, equipment and asset based lenders
- **Documents asked for:** Monthly recurring revenue and churn reports, financial model, cap table, bank statements, SR&ED claim
- **Typical minimums:** $15,000 or more in monthly recurring revenue, or an institutional round for venture debt

## Which loans work best for software and tech startups?

Revenue based financing works best for a software company with $15,000 or more in monthly recurring revenue and low churn, because the lender advances a multiple of that revenue and is repaid from it. Venture debt works best right after an institutional equity round, when a lender will extend 20% to 40% of the round to stretch runway. SR&ED financing works best for Canadian companies with a large refundable claim, advancing 60% to 80% of it months before the refund arrives.

- Revenue based: 3 to 6 times monthly recurring revenue, factor rates of 1.08 to 1.3 or 6% to 12% of revenue remitted.
- Venture debt: 2 to 4 year terms, 10% to 15% interest plus warrants.
- SR&ED: 1% to 2% per month on the advance, repaid from the refund.

## What do lenders like and dislike about tech startups?

Lenders like recurring revenue on annual or monthly contracts, net revenue retention above 100%, gross margins of 70% or more, a credible investor on the cap table, and a founder who can produce clean monthly reporting. For SR&ED lenders, a history of claims that were paid without dispute is the main thing.

They dislike burn with under six months of runway, revenue concentrated in one or two customers, services revenue dressed up as software, and founders who refuse any personal guarantee. Banks dislike all of it until the company shows profit on a tax return.

## How much can a software startup borrow?

Revenue based lenders typically advance three to six times monthly recurring revenue, so a company at $60,000 a month can usually access $180,000 to $360,000, with larger multiples for lower churn. Venture debt is sized to the last equity round: a $5 million round often supports $1 million to $2 million of debt. SR&ED lenders advance 60% to 80% of the expected refund, which for a $500,000 claim means $300,000 to $400,000. None of these count projections, only revenue already booked. See [how much can I borrow](https://businessloanbroker.ai/tools/how-much-can-i-borrow/).

## What documents will you be asked for?

Startup lenders want operating metrics more than tax returns:

- Monthly recurring revenue by month for 12 to 24 months, with new, expansion, churned and contracted revenue broken out
- Customer list with contract values and renewal dates
- Bank statements for 6 to 12 months and a current cash balance
- A financial model showing burn and runway
- Cap table and the term sheet or closing documents from the last round for venture debt
- The filed or draft SR&ED claim and prior years' notices of assessment for SR&ED financing
- Incorporation documents and founder identification
The [document checklist](https://businessloanbroker.ai/guides/document-checklist/) has the general list.

## What are the common uses of funds?

Startup debt typically pays for one of these.

- Extending runway: $1.5 million of venture debt after a Series A so the next raise happens at a better valuation.
- Growth spend with known payback: $250,000 of revenue based financing for sales hiring and ads when a customer pays back its acquisition cost within a year.
- Bridging a tax credit: $350,000 advanced against a Canadian SR&ED claim to make payroll until the refund lands.
- Hiring engineers ahead of a contract: see [hiring and payroll](https://businessloanbroker.ai/situations/hiring-and-payroll/).
- Buying a small competitor: an acquisition loan sized to the combined recurring revenue.

## What usually gets a tech startup application declined?

The most common reasons are no revenue yet, revenue that is falling or churning faster than it is added, and runway under six months at the time of application. Lenders also decline when one customer is more than a third of revenue, when the revenue is mostly services rather than subscriptions, and when the founders will not sign a personal guarantee or a lien on company assets. Venture debt is declined without a recognized investor in the last round. SR&ED financing is declined on a first claim with no history or after disputed claims. Pre revenue founders should read [startup loans with no revenue](https://businessloanbroker.ai/situations/startup-no-revenue/) for the few real options.

## How to apply

Apply once here with your revenue exports, bank statements and, if you have one, your SR&ED claim or last round documents, and your application reaches revenue based, venture debt and tax credit lenders together. Or connect your AI assistant to our MCP server through the [agents hub](https://businessloanbroker.ai/agents/) and have it pull the metrics, fill the application and submit. It is free to the company, and offers come back to the same place.

| Product | Amounts | Typical cost | Speed | Best for |
|---|---|---|---|---|
| Revenue based financing | $50,000 to $5M | Factor rate 1.08 to 1.3 | 1 to 2 weeks | Growth spend with known payback |
| Venture debt | 20% to 40% of last round | 10% to 15% plus warrants | 4 to 8 weeks | Extending runway after a raise |
| SR&ED financing | 60% to 80% of the claim | 1% to 2% per month | 1 to 3 weeks | Canadian companies with refundable claims |
| Recurring revenue line | 1.5 to 3 times monthly revenue | Prime plus 2% to 6% | 3 to 6 weeks | Companies past $1M annual recurring revenue |

## Questions and answers
**Can a startup with no revenue get a loan?**

Almost never from the products on this page, which all underwrite revenue, investors or a tax credit. Options before revenue are business credit cards on personal credit, SBA microloans, grants, and in Canada programs from BDC and Futurpreneur. The honest answer is that most companies need six months of revenue before debt makes sense.

**Is revenue based financing cheaper than raising equity?**

In cash terms it costs a fixed fee, often 8% to 30% of the amount, repaid within 6 to 18 months. Equity costs nothing in cash but a permanent share of the company. Revenue based financing makes sense for spending with a predictable payback, like sales hiring or ads, and makes no sense for covering losses with no plan.

**Does venture debt require investors?**

Yes. Venture debt lenders lend on the strength of the investors who just funded you, on the assumption they will support the company through the next round. A company without an institutional round can sometimes get revenue based financing or a recurring revenue line instead.

**How does SR&ED financing work in Canada?**

You file or prepare a Scientific Research and Experimental Development claim, and a specialist lender advances 60% to 80% of the expected refund within a few weeks. Interest accrues monthly until the Canada Revenue Agency pays, usually several months later, and the refund repays the loan. Companies with prior paid claims get the best terms.

## Related
- [Venture debt](https://businessloanbroker.ai/business-loans/venture-debt/)
- [Revenue based financing](https://businessloanbroker.ai/business-loans/revenue-based-financing/)
- [SR&ED and grant financing in Canada](https://businessloanbroker.ai/business-loans/sred-and-grant-financing/)
- [Startup business loans](https://businessloanbroker.ai/business-loans/startup-business-loans/)
- [Startup business loans with no revenue](https://businessloanbroker.ai/situations/startup-no-revenue/)
- [Using AI to get a business loan](https://businessloanbroker.ai/guides/using-ai-to-get-a-business-loan/)

## Apply
Apply for the business: https://apply.businessloanbroker.ai/signup?utm_source=direct&utm_medium=organic&utm_content=md-software-and-tech-startups
MCP server for AI agents: https://mcp.businessloanbroker.ai/mcp (docs: https://businessloanbroker.ai/agents/mcp/)