Industries
Technology and software
Software businesses are funded on contracted recurring revenue rather than physical assets. Facilities size on annual recurring revenue, retention and gross margin.
Technology and software
- Recurring-revenue and ARR-based facilities
- Venture and growth debt alongside equity
- Acquisition funding for consolidation
- Common structures
- ARR-based recurring-revenue debt, venture debt, acquisition finance
- Typical facility size
- €1 million – €30 million
- Indicative pricing
- 8–14 per cent all-in, plus warrant coverage where applicable
- Security
- Debenture; IP charge in some structures
- Time to funding
- 4–10 weeks from complete data room
Revenue-led, asset-light capital needs
Technology and software businesses typically carry few hard assets, meaning conventional asset-backed lending offers little headroom. What they do carry is contracted, recurring revenue — subscription income, licence renewals or usage-based fees — which has become an accepted lending metric in its own right for businesses with sufficient scale and retention.
The capital need is usually growth rather than working capital in the traditional sense: hiring ahead of revenue, funding customer acquisition, or extending runway between equity rounds without accepting dilution at a depressed valuation.
Structures suited to recurring revenue
Recurring-revenue facilities, sized as a multiple of annual recurring revenue (ARR), provide non-dilutive capital for companies with strong retention and gross margin, typically alongside or in place of a further equity round. Venture debt performs a similar function for earlier-stage, venture-backed companies, usually structured with a modest warrant attached.
Acquisition funding is increasingly used for consolidation within software verticals, where a platform business acquires smaller competitors or complementary product lines, financed through a mix of senior debt and vendor terms.
Companies further from profitability, or without meaningful ARR, are generally better served by equity or convertible instruments; GFG will say so rather than force a debt structure that does not fit.
What lenders scrutinise
Recurring-revenue lenders focus on net revenue retention, gross churn, gross margin and customer concentration far more than headline ARR growth. A high growth rate built on heavy discounting or a handful of large accounts is treated with more caution than steadier, diversified growth.
Cash burn rate against runway, the quality of monthly recurring revenue reporting, and cohort-level retention data are standard requests; companies without clean, exportable data from their billing system experience longer underwriting timelines.
Where applications typically fail
Founders frequently approach recurring-revenue lenders before ARR and retention metrics reach the threshold most providers require, leading to a decline that could have been avoided with better timing. Overstated ARR — including one-off or non-recurring items in the recurring revenue base — is a further common cause of delay once diligence tests the numbers.
A third failure point is applying to a single lender without benchmarking pricing or covenant terms, which in a fragmented market of specialist providers can leave meaningful value on the table.
How GFG runs the process
GFG reviews ARR quality, retention and burn before approaching providers, and is candid where a company is not yet ready for debt financing so that time is not lost with unsuitable lenders. Facility terms — including warrant coverage, covenants and pricing — are benchmarked across relevant specialist providers before recommending a structure.
What ARR level is needed?
Institutional recurring-revenue lenders generally start around €2–3 million of ARR.
What ARR growth rate do recurring-revenue lenders expect?
Growth rate matters less than retention and predictability. Lenders generally prefer steady, diversified ARR growth with strong net revenue retention over rapid growth concentrated in a small number of accounts or driven by heavy discounting, since the latter is harder to underwrite reliably.
Does venture debt affect our next equity round?
Properly structured venture debt is disclosed to and generally welcomed by new investors as it extends runway without materially diluting existing shareholders. Excessive debt relative to the company's stage, or covenants that conflict with planned investor terms, can complicate a raise, so structuring is coordinated with the equity timeline.
Can pre-revenue or early-stage software companies access debt funding?
Rarely through recurring-revenue or venture debt structures, which generally require demonstrable ARR and a funded runway. Pre-revenue companies are usually directed towards equity, grant funding or founder/angel capital rather than debt at this stage.
How is customer concentration treated in underwriting?
A small number of large customers accounting for a disproportionate share of ARR is treated as a risk factor, since losing one materially affects the revenue base the facility is sized against. Lenders typically apply a lower advance rate or additional covenants where concentration exceeds their comfort threshold.
Is a warrant always required for venture debt?
Most venture debt facilities include a modest warrant, typically representing a small percentage of the facility value in equity, reflecting the higher risk taken relative to conventional lending. Recurring-revenue facilities for later-stage, cash-generative companies less commonly require one.