In 2024, non-dilutive funding for private-sector fusion companies reached a record $166 million, marking a 53% increase from 2023’s $108 million and a tenfold rise compared to 2022’s $16 million.
For a lot of upcoming businesses, getting access to the needed funding often means relinquishing ownership to some extent. However, for those who wish for non-dilutive funding options, there are companies out there willing to provide the necessary funding that does not require a stake in the business. One such company is Lighter Capital, providing up to $4 million in flexible financing without requiring equity, personal guarantees, warrants, or covenants.
In this article, we’ll look into Lighter Capital, their offerings, and how they are structured to secure funding through them. Additionally, we’ll explore alternative funding sources that provide varying terms, amounts, and funding speeds, catering to different geographical regions and business needs.
What is Lighter Capital?
Founded in 2010, Lighter Capital is a financial services firm that provides non-dilutive funding (capital provided without requiring equity or ownership in return) solutions tailored for tech startups, particularly those in the SaaS sector. They offer as much as $4 million in flexible financing without requiring founders to give up equity, personal guarantees, warrants, or covenants. This enables entrepreneurs to scale their businesses while maintaining full ownership and control.
Lighter Capital Financing Options
Lighter Capital understands that startups have diverse funding needs, so they offer three distinct financing solutions to cater to different situations.
Revenue-Based Financing
This option is ideal for businesses with a steady stream of monthly recurring revenue (MRR), such as SaaS companies or subscription-based services. You get upfront capital, and in return, Lighter Capital takes a percentage of your future revenue.
For instance, imagine a SaaS startup with $50,000 in monthly recurring revenue that receives $500,000 in funding. If revenue surges to $70,000 in a given month, repayments increase proportionally, helping the lender recover faster. Conversely, if revenue dips to $40,000, repayments adjust downward, reducing financial strain.
This flexibility makes it particularly valuable for companies in growth stages or seasonal industries, allowing them to scale operations, invest in marketing, or enhance product development without the rigid repayment schedules of traditional loans.
Term-Based Financing
This works like a traditional loan, with upfront capital repaid in fixed monthly installments over a set term, typically up to three years.
For example, a manufacturing company needing $1 million for equipment upgrades might choose term-based financing to ensure predictable costs. Knowing they will pay a fixed $30,000 per month (depending on the terms) allows them to budget confidently, regardless of business performance.
This option is especially appealing for businesses prioritizing stable cash flow management, as it eliminates uncertainty and provides a clear timeline for repayment.
Contract-Based Financing
Tailored for startups with shorter-term revenue streams, this option is ideal for businesses operating on contracts lasting less than a year, such as event management companies or marketing agencies. You get upfront capital, and your repayments are tied to your monthly cash flow.
Suppose an event planning firm secures a $300,000 funding agreement to execute a high-profile corporate event, with repayment linked to cash flow from client contracts. As the client pays for services, a portion of that revenue automatically goes toward repayment, aligning obligations with income.
This model ensures that businesses aren’t overburdened during slower months while still leveraging upfront capital to meet immediate operational needs. It’s a flexible and pragmatic choice for industries reliant on contract-based payments or irregular income cycles.
Note: With any of the plans, your startup can get up to $4M USD or $1M AUD.
Funding Guidelines
These funding guidelines, sourced directly from Lighter Capital, outline the key criteria for evaluating businesses seeking funding.
1. Companies must have at least $15,000 in monthly recurring revenue (MRR), demonstrating a reliable and consistent income stream.
2. They should show a year-over-year growth rate of more than 15%, indicating sustained expansion and market traction.
3. A gross margin above 50% is required, ensuring the business is operating efficiently and generating sufficient profit relative to its costs.
4. Net burn must be kept under 50%, meaning the company is managing expenses effectively and not depleting cash reserves too quickly.
5. Companies need to be either currently profitable or have a clear pathway to achieving profitability, signaling long-term financial viability.
6. There should be at least four paying clients, with revenue diversification such that the top three clients account for less than 50% of revenue and no single client contributes more than 30%, reducing dependency on a small number of customers.
7. High customer retention rates or long-term contracts are necessary, reflecting client satisfaction and predictable revenue stability.
8. At least six months of revenue history, preferably 12, is required to provide confidence in the business’s financial performance and reliability.
9. Companies must be based in the United States or operate a US-based subsidiary to align with jurisdictional and market priorities.
How to Apply
To apply, you can visit their website and complete the five-step process required.
- Complete the Application: Start by filling out a simple application form, which typically takes about three minutes. You’ll need to answer a few questions about your company.
- Consult an Investment Advisor: After submitting your application, you’ll meet with an investment advisor to discuss your financial needs, review qualifications, and compare Lighter Capital’s offerings to alternative funding options.
- Connect Your Financials: Link your financial information to help determine the optimal financing plan, the amount you qualify for, and the specific steps required to finalize the process.
- Review Payment Terms and Receive Funds: Understand your payment plan details and receive information on the timeline for fund disbursement, which usually takes a few days.
- Grow: As a Lighter Capital client, you’ll receive invitations to join the Lighter Capital CEO Community, gain access to over $100,000 in product and service discounts, and enjoy other benefits designed to support your company’s growth.
The application process typically takes 3–4 weeks but can be expedited, with funds available within days of approval. No pitch deck or valuation negotiation is required, but due diligence ensures a strong fit and the best deal for your goals.
Structure and Fees
Lighter Capital’s revenue-based financing (RBF) is structured differently from traditional loans. Instead of fixed monthly payments, you pay a fixed percentage of your topline revenue until the total repayment cap is reached. The repayment cap typically ranges between 1.3x and 1.5x the funded amount, depending on your business’s health and stage.
While you can repay the loan early, including the return cap, there is generally no incentive to do so. However, exceptions apply for specific events, such as raising a venture capital round within the first year. If your company gets acquired, you simply buy out the remaining debt, celebrating your successful exit with a clean slate.
Lighter Capital Pros and Cons
Lighter Capital offers a range of benefits and some considerations for tech startups seeking non-dilutive financing:
Pros
- Substantial Financing Amounts: Access up to $4 million in funding, providing significant capital to fuel growth.
- Non-Dilutive Financing: Obtain capital without giving up equity or control, allowing founders to retain full ownership and board seats.
- Additional Benefits: Gain access to over $100,000 in products, and services tailored for startups from Silicon Valley Bank, a supportive startup community, and connections with other CEOs and founders.
- Subordination to Bank Debt: Lighter Capital is willing to subordinate to bank debt, allowing businesses to prioritize existing banking obligations while still accessing additional capital.
Cons
- Geographical Limitations: Funding is available only to companies based in the US, Canada, or Australia, which may exclude businesses in other regions.
- Eligibility Requirements: A minimum annual recurring revenue (ARR) of $200,000 is required, targeting more established startups.
- Time to Funding: The funding process typically takes 3–4 weeks, which is longer compared to some competitors offering quicker disbursement.
- Repayment Cap: The repayment cap ranges between 1.3x to 1.5x the funded amount, potentially resulting in a higher annual percentage rate (APR) than some alternatives.
Alternatives to Lighter Capital
Founderpath is a fintech company that assists SaaS founders in converting their monthly recurring revenue (MRR) into immediate capital through cash advances. They offer up to $4 million in funding within 48 hours, providing both factoring agreements and term loans with payback periods ranging from 12 to 48 months. Notably, Founderpath does not charge platform fees and is built by SaaS founders for SaaS founders. Founderpath supports businesses located in the USA, Canada, South America, Europe, and Asia.
Capchase provides non-dilutive financing and flexible payment terms for B2B SaaS companies. Their products include Capchase Pay, which allows companies to receive annual upfront payments without requiring discounts, and Capchase Grow, offering funding based on future recurring revenue. Serving over 5,000 partners and customers, Capchase caters to a wide range of businesses, from fast-growing startups to public companies. Capchase supports businesses located in the US, Canada, UK, Finland, Spain, Netherlands, and Belgium.
Cirrus Capital offers revenue-based financing (RBF) as a flexible, non-dilutive funding solution for businesses seeking growth capital without sacrificing equity. Their RBF model aligns repayment with a company’s revenue streams, allowing payments to fluctuate based on performance. Repayments are made through a fixed percentage of monthly revenues until a predetermined cap is reached, typically ranging from 1.3x to 2.5x the initial funding amount. Cirrus Capital focuses on U.S.-based businesses seeking to raise more than $1 million in non-dilutive capital, generally working with companies generating over $3 million in annual revenue or possessing at least $3 million in business assets.
Conclusion
Choosing the right financing partner is crucial for your startup’s growth and sustainability. While Lighter Capital offers substantial non-dilutive funding and additional resources, it’s essential to consider factors such as funding speed, eligibility criteria, and repayment terms. Exploring alternatives like Founderpath, Capchase, and Cirrus Capital can provide different advantages tailored to your company’s specific needs. By thoroughly evaluating each option, you can select a financing partner that aligns with your business objectives and supports your long-term success.
FAQs
What Types of Companies Does Lighter Capital Fund?
Lighter Capital primarily funds tech startups, especially those in the SaaS sector, that generate recurring revenue and are based in the US, Canada, or Australia.
Does Lighter Capital Require Equity in Exchange for Funding?
No, Lighter Capital provides non-dilutive financing, meaning founders retain full ownership and control of their companies.
What Can the Funding From Lighter Capital Be Used For?
The funding can be used for various growth initiatives, including working capital, sales and marketing, product development, and hiring new team members.
Are There Any Fees Associated With Applying for Funding?
Lighter Capital does not charge loan origination fees, making the financing process more cost-effective for founders.
