Software and tech startup loans

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.

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 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.
• 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 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 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.