A term loan is where investors provide a lump sum amount of cash upfront against specific borrowing terms. Like revenue-based financing investors, term loan investors view recurring revenue as an “asset” on which to secure the loan.
Term loans are typically tailored to your business based on your specific metrics, and the cost of capital is risk-adjusted to reflect your company’s unique characteristics. The business repays the loan over an agreed term (i.e., 2-3 years).
Unlike revenue-based financing, term loan repayments are very low (interest-only or similar) in the beginning to keep working capital in the business—even in high-growth periods). There is usually a balloon payment at the end of the term to cover the balance.
Looking for non-dilutive capital?
TIMIA Capital works with B2B SaaS and software-enabled
companies between $2 – $20 million ARR.