SaaS Financing Options to Fund Your Startup in 2026

SaaS means opportunity for entrepreneurs. The SaaS market continues to grow at a healthy pace—the global market’s estimated worth is expected to surpass $450 billion in 2025, with a CAGR of 12% over the next 5 years.

For investors, SaaS means security. One of the most appealing features of SaaS startups is their sticky revenue streams, which make them less risky investments. SaaS companies often start generating revenue much earlier compared to startups in other tech categories. And thanks to their higher margins, many are able to bootstrap for a long time to gain early traction.

At some point, though, not fundraising means limiting growth.

Do you have enough runway to reach that next level when opportunity strikes? What SaaS funding options are out there if you need more capital?

Banks are notoriously averse to lending to SaaS startups. This is because bankers have much lower risk tolerance, and they can’t underwrite a loan based on the value of non-tangibles like prepaid subscription-based revenue. Without any hard assets or personal guarantees for collateral, the chance of getting a traditional business loan is slim.

Equity funding has its downsides, too—for many founders, it’s not worth diluting equity and ceding control of the business for a couple million dollars.

Funding Market Trends

Venture capital has been harder to come by as large portfolios and low exits limit liquidity. Large AI investments (over $1 billion) accounted for almost 40% of deals in Q3 2025, which was the main driver of market deal value according to PitchBook.

Even if exits pick up in 2026, VCs are likely to be selective when it comes to recycling capital into new investments, and that will perpetuate a weak fundraising environment.

Source: PitchBook's Q2 2025 Global Venture First Look

Private debt fund volume has significantly outpaced VC fundraising so far in 2025, while delivering more stable returns. Limited partners (LPs) invested at least $124 billion into private debt funds in the first half of 2025 alone, demonstrating a strong preference for the asset class (NEPC Quarterly Private Markets Report: Q2 2025). As a result, there are a lot of debt financing options for qualified SaaS businesses.

The Bottom Line

It’s a strong growth market for SaaS startups, but funding conditions are tough. If you're not sure where to get the growth capital you need for 2026, check out 5 popular SaaS financing options below.

5 SaaS Financing Options

Lighter Capital's experienced investment team has connected with thousands of SaaS entrepreneurs considering non-dilutive debt financing. Here are the most common funding sources we've seen SaaS entrepreneurs exploring to extend runway and drive business growth.

1. Internal funding sources & convertibles

Before gaining traction, many early-stage tech entrepreneurs look for loans from sources close to them: co-founders, board members, or friends and family. They often structure these as convertible notes.

Convertible debt is relatively low-interest and converts into equity at a specified date (generally after raising a funding round). It’s flexible and simple for both investors and founders, but there are a few things you'll need to watch out for:

1. Subordination terms. If the terms are aggressive, they can inhibit your ability to get additional debt from other institutional lenders later on.

2. Maturity date. Some convertible loans mature at 24 months, but some are much shorter: 18 months or even 12. If you’re unable to raise a priced equity round before the maturity date, your convertible notes won’t convert to equity, and you could owe a big payment.

2. Revenue-based term loans

This familiar term loan structure offers upfront cash that’s paid back in fixed monthly payments over a predetermined amount of time. These loans are straightforward and predictable, compared to less conventional debt instruments. Unlike a traditional term loan from a bank that’s hard to get and will likely require collateral to secure, as well as debt covenants that can restrict your business operations, a revenue-based term loan is far more SaaS-friendly.

The application process is quick and easy, and you don’t have to put your house on the line to fund your runway. Secured against your recurring revenue streams, you won’t get the rock-bottom interest rate you would from a bank, but it’s far cheaper than selling equity in exchange for capital.

3. Revenue-based financing

If you’re generating $200,000 in ARR or more, traditional revenue-based financing can be a good option for you. Lighter Capital pioneered this SaaS financing solution more than a decade ago, providing upfront cash in three- to five-year loans that are structured with flexible monthly payments that ebb and flow with your revenue stream.

For early-stage SaaS companies with lumpy or seasonal cash flows, the revenue-based financing model may be ideal. You'll have smaller payments in tight months and bigger payments in flush ones, which means you won't be on the hook for fixed monthly payments your business can't support.

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Don't sign a loan agreement until you've read our buyer's guide.

Want to avoid the tricky terms and conditions that can hold your startup back or slow you down? When you know the right questions to ask lenders, you can confidently compare financing costs and how repayments will affect your cash flow. Our debt buyer's guide has you covered.

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4. A/R factoring

With a SaaS business, you subscription terms often vary. Some clients may pay you on a monthly basis, but some may pay net 60, or even 90. A/R factoring allows you to borrow money based on your accounts receivable. Your ability to get approved for factoring will depend heavily on the quality of your contracts. It's similar to getting a business loan from a bank—if you have a Fortune 500 client or two, the bank will feel much more comfortable lending to you.

5. MRR line of credit

The monthly recurring revenue or MRR line of credit is a relatively new lending instrument. SaaS businesses have monthly recurring revenue, and some lenders are willing to lend between 3–5X of your MRR to help you grow faster. If you have $5 million in annualized revenue, a tech bank may have products that are similar to MRR lines for you. Most lenders, however, will require a personal guarantee, so make sure you read the fine print before you sign.

Typically, lines of credit are ideal for short-term working capital expenses, not investments in long-term growth, since the capital can become very costly if it’s not paid back quickly.

A word of caution

You may encounter lenders that describe their loans as revenue-based financing, but in reality they're offering factoring debt or merchant cash advance (MCA) loans. Both are better suited for immediate, short-term cash needs. If you're shopping for capital to invest in longer-term growth, these debt instruments can not only be very expensive but also they can negatively impact your startup's cash flow. In fact, so many businesses had defaulted on SBA loans after taking on MCAs and factoring debt that the SBA recently added new lending restrictions.

Again, always read the fine print!