top of page

Important Disclaimers
This article (the “Article”) is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any investment or any securities. This Article does not constitute investment advice and is not intended to be relied upon as the basis for an investment decision, and is not, and should not be assumed to be, complete. Readers should make their own investigations and evaluations of the information contained herein. The information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person or entity who may receive it. Each reader should consult its own attorney, business adviser and tax adviser as to legal, business, tax and related matters concerning the information contained herein.  Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date of preparation. Certain information contained in this Article constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,”  “target,” “project,” “estimate,” “intend,” “continue” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. Readers should not rely on these forward-looking statements.  Certain information reflects subjective determinations which may prove to be incorrect. There can be no assurance that the estimates or projections will be accurate or that historical trends will continue. In considering the prior performance information contained herein, readers should bear in mind past performance is not necessarily indicative of future results. All rights reserved. The material may not be reproduced or distributed, in whole or in part, without the prior written permission of PrimeAlpha LLC.

Debt Growth Capital For SAAS Companies

Debt Growth Capital For SAAS Companies

Debt financing for Software as a Service (SaaS): Why Investors Should Pay Attention: Equity Returns for Debt Risk

The rapid evolution of Software as a Service (SaaS) reflects its increasing dominance in the tech sector. This shift has not only made SaaS companies more profitable and scalable but also resilient against economic downturns, as evidenced by consistent growth during the Great Recession. Such dynamics underscore the sector's robust potential and make it an attractive focus for both investors and businesses.

Alternative debt financing for SaaS companies offers a viable alternative to traditional equity financing, which often involves ownership dilution. This financing method allows SaaS businesses to secure essential growth capital while retaining more control over their operations and strategic decisions. The approach presents a clear value proposition to borrowers: lower capital costs and preserved ownership structures, which are crucial for companies targeting rapid expansion.

The investment landscape for SaaS provides compelling opportunities due to the favorable risk-return profile of specialized private credit strategies. Features like senior-secured loans, competitive interest rates, and low loan-to-value ratios make these investments attractive for those seeking high-yield returns with managed risks. This niche strategy allows investors to effectively capitalize on the ongoing growth and valuation expansions in the software industry.

Access the full report to explore the investment opportunities in the Software as a Service (SaaS) sector. Discover how alternative debt financing can empower SaaS companies and attract investors by offering significant returns with controlled risks. Uncover the advantages of private credit strategies in this dynamic industry.

If you do not have a work email address, please email us at and we can email you the report directly.

Table of Contents

  • The Software Evolution

  • Value Proposition to Borrowers: Preserve Optionality and the Cap Table

  • Why Investors Should Pay Attention: Equity Returns for Debt Risk

Thanks to our Contributor

Recurring Capital Partners

Recurring Capital Fund II specializes in debt financing for Software as a Service (SaaS) companies and other recurring revenue businesses. The firm focuses on high gross margin companies and provides senior secured, four-year term loans with warrant kickers, and all loans are floating. The cash on cash yield is in the low teens. Founded in 2016 in recognition that the migration from the license/maintenance to a subscription-based model enabled companies to service debt.


Access PrimeAlpha Alternatives Education, Research, and Database of Managers and Investors
bottom of page