The #1 request we got from SaaS founders in 2023 was:
Can you offer a 48 month payback with a 24 month interest only period?
I’m pleased to share we’ve done our first Term Loan where we have flexibility to offer up to 48 month payback and 24 month IO periods.
We’ll do $100-$150m in term loans in 2024 to B2B SaaS companies.
Besides payback period and IO periods you’ll want to know:
What interest rate does Founderpath offer in a Term Loan?
(Especially for those CFO’s reading this getting ready to recommend Founderpath to your CEO and board)
We think about interest rates in 3 ways:
Quality of the SaaS company (Net dollar retention, Burn, ARPU, CAC, Runway, Churn, etc)
Operational experience of the team (Years in business, quality of management team)
Macro conditions driven by interest rates that $100m+ ARR SaaS companies are being offered by publicly traded BDC’s
I spent the holiday digging deeper into the 10K public disclosures of the top 12 BDC’s:
Large SaaS Companies Are Paying 11.05% to 15.75% Interest Rates Today
Most large SaaS companies raise debt from Business Development Corporations or BDC’s like Ares, Hercules, and Oaktree.
We’ll get to those in a minute.
Companies pay interest rates up to 15.75%.
Here are 13 of the more well-known SaaS companies who’ve raised debt from BDCs:
| Company | Loan Size | Interest Rate | BDC | FTE’s | Equity Raised | Est Revenue FTE Method | Company Age |
| BazaarVoice | $229m | 11.05% | Blackstone | 1,700 | $130,550,000 | $187,000,000 | 19 |
| Cart.com | $24m | 15.75% | Triple Point | 532 | $481,000,000 | $58,520,000 | 4 |
| Finastra | $190m | 12.71% | Ares | 13,000 | $24,100,000 | $1,430,000,000 | 7 |
| Gainsight | $47m | 11.58% | Goldman | 1,300 | $156,250,000 | $143,000,000 | 15 |
| MindBody | $64.9m | 12.50% | Blue Owl | 1,300 | $614,500,000 | $143,000,000 | 23 |
| Ping Identity | $22m | 12.32% | 6th Street | 1,400 | $128,350,000 | $154,000,000 | 22 |
| PluralSight | $106m | 13.45% | Ares | 2,300 | $192,000,000 | $253,000,000 | 20 |
| SiSense | $34.3m | 11% | Hercules | 660 | $274,000,000 | $72,600,000 | 20 |
| SumoLogic | $22.4m | 11.80% | Hercules | 920 | $340,000,000 | $101,200,000 | 14 |
| Telestream | $23m | 15.26% | Oaktree | 456 | $54,300,000 | $50,160,000 | 26 |
| UserZoom | $4m | 12.42% | Mainstreet | 1,800 | $288,000,000 | $198,000,000 | 17 |
| WPEngine | $66m | 11.87% | Blackstone | 1,100 | $290,700,000 | $121,000,000 | 14 |
| Zendesk | $69.6m | 12.05% | Blue Owl | 6,000 | $85,500,000 | $660,000,000 | 17 |
| PDI Holding | $6.9m | 14.03% | Ares | 2,000 | $7,250,000 | $220,000,000 | 26 |
The Top 12 BDC’s Have $15.97 Billion in Outstanding Debt to SaaS Companies
Publicly traded BDC’s are some of the largest debt investors in SaaS companies. By studying their 10-K’s filed in November 2023, we get an idea of what interest rate companies like Gainsight, SiSense, and Ping Identity are paying.
The 12 largest BDC’s have $84.55 billion of total debt exposure across all industries and $15.97 billion in SaaS exposure:
| Ticker | BDC | Total Debt Investments (All Industry) | % SaaS Debt | $ SaaS Debt | WA Yield |
| ARCC | Ares Capital | $21,800.0m | 23.00% | $5,014.0m | 16.40% |
| FSK | FS KKR Capital | $15,384.0m | 17.70% | $2,600.0m | 12.20% |
| ORCC | Owl Rock Capital | $12,900.0m | 12.70% | $1,638.3m | 11.80% |
| BXSL | Blackstone | $9,500.0m | 16.00% | $1,520.0m | 12.20% |
| GBDC | Golub Capital | $5,200.0m | 26.00% | $1,352.0m | 12.00% |
| TSLX | 6th Street | $3,100.0m | 30.00% | $930.0m | 14.30% |
| HTGC | Hercules Capital | $3,310.0m | 25.40% | $840.7m | 15.50% |
| MAIN | Main Street Capital | $3,900.0m | 15.00% | $585.0m | 12.70% |
| GSBD | Goldman Sachs | $3,400.0m | 15.30% | $520.2m | 12.60% |
| OCSL | Oaktree Specialty Lending | $2,900.0m | 16.50% | $478.5m | 12.70% |
| MFIC | Midcap Financial | $2,370.0m | 12.10% | $286.8m | 12.00% |
| TPVG | TriplePoint Growth BDC | $782.9m | 26.40% | $206.7m | 15.10% |
| Total | $84,546.9m | $15,972.2m |
The data used in this article focuses on 47 debt deals totaling $1.68 billion raised by 32 SaaS companies (15 companies have raised from multiple BDC’s) from the 12 BDC’s listed above.
Why do BDC’s Require $50m+ in VC Funding? [Founderpath does not]
BDC’s use the words “Sponsor backed” or “Venture Debt” on their websites and in their investor presentations.
This means BDC’s will not give you a term sheet unless you’ve raised equity. The equity investor is the “Sponsor” or the “Venture” firm (ex: Insight Partners, a16z, Sequoia).
As an example, SaaS companies who secured interest rates under 15% have all raised more than $10m of equity.
24 out of the 32 founders have raised more than $85m in equity (that’s a lot of dilution).
BDC’s ask for this because they see the VC capital as extra protection.
If the company ever gets into trouble, the BDC is betting that the VC will want to protect their equity by investing more cash so the company can make its debt payments.
BDC’s want to see 100’s of employees [Founderpath does not]
All 32 SaaS companies have large teams of more than 100. If you want to keep a small, nimble team, your probability of raising debt from a BDC is low.
Note: Logarithmic Y axis for clarity
BDC’s want $5m+ of EBITDA and revenues of $50m+ [Founderpath does not]
29 of the SaaS companies have $50m or more of annual revenues (all 32 SaaS companies have more than $10m) and more than $5m of EBITDA.
Note: Logarithmic Y axis for clarity
What Interest Rates to BDC’s Charge SaaS Companies?
BDC’s charge 10-16% interest annually. On a $10m loan, you’d pay $1.6m per year.
On the high end, Triple Point did a Term Loan with Cart.com for $24m at a 15.75% headline interest rate.
11 more examples:
| Company | Loan Size | Interest Rate | BDC | FTE’s | Equity Raised | Est Revenue FTE Method | Company Age |
| BazaarVoice | $229m | 11.05% | Blackstone | 1,700 | $130,550,000 | $187,000,000 | 19 |
| Cart.com | $24m | 15.75% | Triple Point | 532 | $481,000,000 | $58,520,000 | 4 |
| Finastra | $190m | 12.71% | Ares | 13,000 | $24,100,000 | $1,430,000,000 | 7 |
| Gainsight | $47m | 11.58% | Goldman | 1,300 | $156,250,000 | $143,000,000 | 15 |
| MindBody | $64.9m | 12.50% | Blue Owl | 1,300 | $614,500,000 | $143,000,000 | 23 |
| Ping Identity | $22m | 12.32% | 6th Street | 1,400 | $128,350,000 | $154,000,000 | 22 |
| PluralSight | $106m | 13.45% | Ares | 2,300 | $192,000,000 | $253,000,000 | 20 |
| SiSense | $34.3m | 11% | Hercules | 660 | $274,000,000 | $72,600,000 | 20 |
| SumoLogic | $22.4m | 11.80% | Hercules | 920 | $340,000,000 | $101,200,000 | 14 |
| Telestream | $23m | 15.26% | Oaktree | 456 | $54,300,000 | $50,160,000 | 26 |
| UserZoom | $4m | 12.42% | Mainstreet | 1,800 | $288,000,000 | $198,000,000 | 17 |
| WPEngine | $66m | 11.87% | Blackstone | 1,100 | $290,700,000 | $121,000,000 | 14 |
| Zendesk | $69.6m | 12.05% | Blue Owl | 6,000 | $85,500,000 | $660,000,000 | 17 |
| PDI Holding | $6.9m | 14.03% | Ares | 2,000 | $7,250,000 | $220,000,000 | 26 |
What Fee’s or other costs do BDC’s charge SaaS Companies?
In addition to interest rates, BDC’s make money 3 other ways:
Origination Fee as high as 3%: If you take a $10m loan, you’d pay $300k (3%) upfront.
Exit Fee as high as 9.5%: If you take capital today, and sell your company in 12 months when you still have $10m outstanding with the BDC, you’d pay $950k in exit fee’s. This makes exiting your company harder because either you pay this fee out of your own pocket or you have to convince your buyer to pay this fee.
BDC’s charge this fee to make it really hard for you to churn away from them. They don’t want to have to do the work to find a new home for the money you just paid them early.
| Company | Loan Size | Interest Rate | Investor | Exit Fee |
| SiSense | $34.3m | 11% | Hercules | 2.55% exit fee |
| Suzy | $11.74m | 10% | Hercules | 3.45% exit fee |
| Mynd Management | $10m | 13.75% | Triple Point | 4% end of term payment |
| SiSense | $13m | 15% | Triple Point | 9.5% exit fee |
Warrants as high as 4%: Goldman BDC gave CloudBees a ~$28m term loan which included 1,152,957 (Par/Shares) shares valued at $14.16m (Fair Value) as of June 2023:
This is on top of the 12.22% headline interest rate:
BDC’s are perfect if you have $100m Revenue, $50m+ in VC Raised, and $10m EBITDA
In Summary, Founderpath pays close attention to the cost of capital large SaaS companies are paying.
If you’re doing more than $100m in ARR, with $10m of EBITA, and more than 250 FTE’s, you have a good shot at raising capital from one of these BDC’s.
They’ll charge you a headline rate of 11-16% and make extra return by taking up to 4% warrants, charging up to a 3% origination fee, and charging you up to a 9.55% exit fee to lock you in.
Founderpath is perfect if you have $1-20m Revenue, $0 VC Raised, and are close to Breakeven
Founderpath is meant for SaaS founders doing $1-$20m in revenue with 10-100 FTE’s looking to raise $1m-$5m through a term loan or by factoring their customer contracts.
The perfect Founderpath customer:
- Cares about speed: We’ve financed 450+ draws to 200+ SaaS founders in under 72 hours from signup to money wired.
- Understands that their equity is their most valuable asset: Selling 10% of your company today for a $5m VC round if you think you can exit for $200m in 3 years is expensive (The VC makes $20m at exit on their $5m investment. You would have made $20m more if you used non-dilutive capital to grow instead).
- Protects their time: You understand that raising equity to then go unlock cheaper debt takes months of your life. You don’t like building decks all day and responding to months of diligence questions.
Click here to book a call with me if you want to talk deeper strategy on your 2024 capital plans.
I’ll share my full BDC data set with you and share a sample term sheet so you get an idea of what you have available.
Book 1 on 1 time with me by clicking below:
(If link doesn’t work it means my calendar filled up)
Sources:
Sixth Street Specialty Lending Inc
Main Street Capital Corporation
