Financing for technology and software
Software and tech firms grow on people and recurring revenue rather than hard assets.
Key points
- Tech companies grow on people and recurring revenue, not hard assets.
- Lenders value predictable, contracted revenue.
- Hiring ahead of growth is one of the most common financing needs.
- Acquisitions of smaller firms are a frequent route to growth.
How financing works in technology and software
Software and technology businesses often have strong margins and recurring revenue, but few physical assets. Traditional lenders can struggle with that, because there’s little to secure a loan against.
The right partner looks at what matters in tech: recurring revenue, customer retention and the contracts behind them. Financing is most often used to hire, expand or acquire.
Common financing needs
Here’s how businesses in this industry typically match their needs to the right kind of financing.
| What you need | Usually the best fit | Why |
|---|---|---|
| Hire ahead of growth | Term loans | A lump sum to build the team before revenue catches up |
| Smooth out uneven billing | Lines of credit | A buffer between large invoices and monthly costs |
| Buy a smaller competitor | Business acquisition | Add customers, technology or talent through acquisition |
| Hardware and infrastructure | Equipment financing | Servers and equipment financed over their life |
How NorthMerit can help
Apply once and we’ll connect you with one financing partner who works with businesses like yours. It’s free, and there’s no obligation.
What lenders look at
Lenders look at your recurring revenue, customer retention, contract length and growth rate. Strong retention and multi-year contracts make a business far easier to finance.
Some lenders specialise in technology companies and lend based on recurring revenue rather than assets.
Other things partners commonly ask about: recurring and contracted revenue; hiring ahead of growth; few hard assets to secure.
Hiring ahead of a contract
A software firm signs a large two-year contract and borrows $250,000 to hire four developers before the revenue starts.
How to prepare
Have your revenue by month, customer list and retention, key contracts and recent financial statements ready.
Common questions
Is NorthMerit a lender?
Does it cost anything to apply?
Who will contact me?
Other industries
The right financing, from the right partner.
Apply once. One financing partner who knows businesses like yours. Free, with no obligation.
