The Tech Leaders Guide to B2B Payment Flexibility

Scaling a SaaS company calls for a fresh approach to financing. Traditional debt and equity financing might not be your best option. 

Debt financing often misaligns with the asset-light and rapid-growth nature of SaaS, and equity financing can dilute control.

Recurring Revenue Financing (RRF) offers a flexible, founder-friendly alternative tailor-made for the SaaS business model. 

In contrast, RRF aligns with subscription revenue models, providing growth capital without the usual constraints or loss of equity. 

As the subscription economy races toward a $1.5T valuation by 2025, RRF is evolving into the go-to financial strategy for SaaS businesses poised for growth. 

This article breaks down RRF, its advantages over traditional methods, and how to harness it for maximum growth.

What is Recurring Revenue Financing?

Before we dive into recurring revenue financing, let’s take a minute to understand recurring revenue-based models clearly.

A recurring revenue-based business model consists of streams that generate revenue repeatedly, either monthly or annually. Most SaaS companies use a recurring revenue model as they charge each customer a monthly/annual subscription fee.

Recurring revenue financing includes borrowing money upfront and paying it back either as a percentage of your monthly or annual revenue streams or by selling your recurring revenue stream to your lender.

Source - Ratio Boost

Let's break down how this works in real terms for a SaaS business. 

Say your business consistently pulls in $10,000 a month. With Recurring Revenue Financing, you could get an upfront cash infusion of $120,000. In return, you'd pay back a portion of your monthly revenue. The beauty of this is that your payments flex with your income – higher in booming months, lower when things are tight.

There's another angle too. Imagine you have a customer contract projected to bring in $120,000 over the next year. You could opt to sell this contract for immediate cash, say anywhere between $105,000 to $118,000. It's a slight discount, but it puts cash in hand immediately.

Either way, you're smartly leveraging your predictable income stream for instant funding – a savvy move for forward-thinking SaaS companies.

Pros of Recurring Revenue Financing

  • Doesn’t require equity dilution
  • Retains founder ownership in the company
  • Doesn’t show up as debt on the balance sheet
  • Fast and easy way to access capital
  • Flexible repayments
  • Fewer terms and conditions compared to traditional loans
  • Usually, doesn’t require any personal guarantee

Cons of Recurring Revenue Financing

  • Frequent repayments might hamper cash flow
  • Smaller loan amounts compared to equity-based investments or debt
  • Not a fit for pre-revenue startups

A Potential Choice for SaaS Businesses

SaaS businesses are uniquely positioned to benefit from recurring revenue financing. This financing model aligns perfectly with the predictable revenue streams of SaaS companies, offering enhanced payback flexibility and making it an appealing choice. 

For instance, Bigtincan, a SaaS provider, utilizes recurring revenue financing offered by Ratio. This approach accelerated their deal closures, offering clients payment flexibility and reducing the procurement timeline, all while ensuring Bigtincan received upfront payments, independent of the customer's payment schedule.

The stability and scalability of recurring-revenue-based financing stand out as its major strengths. Unlike traditional loans, which involve complex interest payments, this model is grounded in fixed percentage payments or the sale of a predetermined number of contracts. 

This straightforward structure has benefited companies like, an innovator in AI-driven 3D models. They secured $2 million in non-dilutive capital from Ratio, using this advance against future invoices to fuel their expansion. This strategy provided with financial agility, crucial for growth, without necessitating equity sacrifices.

For rapidly growing companies, the ability to continuously access cash without equity dilution or restrictive covenants is invaluable. 

Recurring revenue financing facilitates seamless scaling up. Moreover, it allows for the retention of company ownership, streamlines administration, and minimizes stakeholder conflicts, making it a prudent choice for SaaS businesses aiming for rapid and sustainable growth.

Important Terms You Must Know

There are some important terms associated with recurring revenue financing that you must be aware of. 

  • Fees: Most RRF providers charge a flat fee on the amount they lend. Continuing our example, if you raise $120K, you might have to pay back 1% to 15% more, somewhere between $121.2K - $138K.
  • Retrieval percentage: It’s the percentage of your recurring revenue you must pay back every month/quarter/year.
  • Revolving line of credit: It allows you to take out and repay a loan upto a preset amount multiple times.
  • Financial covenants: There are conditions on which the loan is given to the borrower. Recurring revenue financing partners might place liquidity covenants, where you’re expected to maintain a minimum amount of liquidity/cash every quarter/month, maximum churn rate covenants, or base recurring revenue conditions.
  • Conversion date: It’s a mechanism under which the terms of a recurring revenue-based loan transition to EBITDA-based measurements.
  • MAC Clause (Material Adverse Clause): This clause allows lenders to break out of financing agreements if there is a huge change in the borrower’s business.

Better Than Traditional Forms of Financing

Traditionally, SaaS businesses raised capital using either equity funding or venture debt. 

Equity financing requires you to give up equity in exchange for funding and often a seat on the board of directors as well, which results in the loss of ownership. It also introduces administrative hurdles and might make it difficult to raise more funds. 

Venture debt is a non-dilutive form of funding; however, it often comes with stringent conditions, high interest rates, extra legal costs, and the possibility of defaulting. 

Recurring revenue financing provides the best of both worlds. It’s a non-dilutive source of funding that comes with flexible repayments, no interest, lenient terms and conditions, and greater ownership retention. 

Many early-stage SaaS companies lack collateral and have a negative EBITDA, making traditional loans harder to get. RRF treats your predictable revenue stream as an asset and provides funding based on it. 

Unlike traditional lines of credit, RRF can also be expanded to meet your needs as you scale up.

Source - Ratio - Funding Options Comparison

Get Started with Recurring Revenue Financing

It’s easy to get started with recurring revenue financing. Many RRF lending platforms allow you to sign up with your company details, integrate your billing platform, and instantly draw out cash.

Ratio is a standout platform allowing SaaS businesses like yours to turn recurring revenue contracts into instant cash. It offers two products tailored to your financing needs: Boost and Trade.

Ratio Boost is an embedded financing solution that allows your customers to enjoy immense payment flexibility at the point of sale; while Ratio provides you the entire contract value (minus the discount rate) upfront.

On the other hand, Ratio Trade is a true-sale-based financing solution where you can sell recurring customer contracts in exchange for instant cash without customer involvement.

Let’s dive into more detail about each of them.

Ratio Boost

Ratio Boost provides flexible BNPL options for your customers. For example, your customers could break up a $120k/year contract into a monthly contract of $10,400/month or a quarterly contract of $43,000/quarter while you get the entire cash upfront. They pay a premium for the flexibility they receive.

Payment flexibility is always better for profitability than discounts, which also helps you close more deals faster.

Ratio allows you to offer immense flexibility at the point of sale, your customers can select a payment plan that best aligns with their business settings. Moreover, you can leave invoicing and underwriting to Ratio's team of experts.

Here, you get to choose out of these three financing options:

  • Seller pays: You pay the financing fees. If the discount rate is 10%, and the contract is worth $100K, you receive $90K.
  • Buyer pays: The customer bears the burden of the financing fees. Continuing the example, the customer would pay $110K, and you’d get $100K.
  • Split 50/50: As the name suggests, you pay half of the fees, and the customers pay the other half. So, the customer would pay $105K, and you’d receive $95K.

Get Started with Ratio Boost

Here’s how Boost works to provide recurring revenue financing:

Step 1. Register on Ratio’s easy-to-use app and submit your business details.

Step 2. Upon approval from Ratio's team within 48 hours, seamlessly integrate Boost into your checkout flow, CRM, or CPQ.

Step 3. By leveraging Ratio's insightful underwriting, your customers can access Buy Now, Pay Later (BNPL) options with personalized quotes and payment schedules.

Step 4. You get the upfront cash while your customers continue to pay flexibly!

Ratio Trade

Trade is a true-sale-based financing solution. That means you can sell assets like yearly contracts in exchange for instant cash. 

For example, if your SaaS business signs up a customer on a $120K/year contract paid quarterly, you can transfer the ownership of that contract to Ratio in exchange for an amount slightly less than $120K upfront. When the customer pays you every quarter, you pay that to Ratio.

The benefit of this approach is that you only pay Ratio when your customer pays you back, and you aren’t stuck to a monthly repayment schedule. Unlike venture debt, there are no financial covenants or warrants, and it doesn’t add liabilities to your balance sheet.

Get Started with Ratio Trade

Here’s how you can obtain recurring revenue financing with Trade:

Step 1. Integrate your bank, financial, and billing systems with Ratio Trade.

Step 2. Ratio conducts necessary checks and either approves or declines your application within 48 hours.

Step 3. Effortlessly add your yearly or multi-year contracts on the platform.

Step 4. Receive cash offers for each contract.

Step 5. If you’re satisfied, accept the offer and watch the cash roll into your bank account!

Key Features

  • Offers two products: 

Boost for revenue-based financing 

Trade for true-sale-based financing

  • Offers up to 80% of ARR as instant cash
  • Flexible payment terms, with no payments for up to 12 months
  • Cash paid out within 48 hours
  • Integrations with various accounting, banking, and payments systems
  • Option for zero-cost financing
  • No restrictive covenants or warrants


  • Access to huge capital; recently raised $411M for financing.
  • No-debt and non-dilutive form of funding
  • Minimal fees compared to other platforms and traditional debt
  • Integrations with many SaaS platforms
  • Fast approval, decline, and payout process


  • Not suitable for pre-revenue non-SaaS businesses

Parting Thoughts

For growing SaaS businesses like yours, recurring revenue financing might be the best option. It’s easy to obtain, scalable, flexible to pay back, and has countless other benefits.

All you need to be aware of is what it is, how it works, its advantages for your company, and how you can get started.

Ratio is a stand-out choice to partner for effortlessly obtaining recurring revenue financing. It provides both revenue-based financing and true-sale-based financing that suit your business needs. 

Don't just manage your finances — master them with ease and flexibility. Take the first step towards a smarter financial future by signing up with Ratio today!


#1) What is ARR financing?

ARR financing refers to funding that is based on a company's Annual Recurring Revenue. In the context of startups and growing businesses, particularly those in the software-as-a-service (SaaS) or subscription-based models, ARR represents a key performance indicator.

Lenders or investors use ARR to assess the financial health and growth potential of a business. A consistent and growing ARR indicates a stable and expanding customer base, which is attractive to financiers.

#2) What is an example of recurring revenue?

Recurring revenue refers to a company’s revenue that is repeatedly generated over a specific period. The best example of recurring revenue is SaaS companies charging monthly subscriptions, as it’s constantly generated every month. Recurring revenue is usually expressed using two terms: MRR, or monthly recurring revenue, and ARR, also called annual recurring revenue.

#3)What is the difference between factoring and revenue-based finance (RBF)?

Conventional factoring allows businesses to sell their outstanding invoices to a third party in exchange for upfront cash. Traditional factoring generally overlooks contractually committed, un-invoiced services not yet delivered. On the other hand, true-sale-based financing, a form of RBF, provides upfront cash in exchange for un-invoiced, contractually obligated cash receipts from the future, too.

#4) Is revenue-based financing a loan?

Yes, technically, revenue-based financing is a loan. It provides you upfront cash in exchange for future revenues that you must pay back, albeit without interest. However, some vendors like Ratio ensure that it doesn’t show up as debt on your balance sheet by purchasing the contract from you and assuming the risk.

If you have any queries about Ratio Boost or Trade, check out this FAQs page.

published on
January 9, 2024
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