Why I’m using a credit facility to grow my startup – TechCrunch

When it comes to financing, startups and established organizations will have vastly different experiences.

Traditional financing may not always be available to high-growth startups, and even when it is, it often depends on the founder’s personal financial picture and their company’s existing revenue. While larger companies can turn to banks and other financial institutions, new founders often have to turn to alternative sources of financing to grow their companies.

For my own company, I decided to look at alternative financing options to scale operations and expand our product road map. To accelerate growth, I decided to raise a small amount of debt equity in tandem with a large, revolving credit facility.

Here’s how and why I’m using a credit facility to grow my company.

Raising a credit facility

Banks often can’t offer a line of credit to a startup or small business, especially to those that don’t have years of operating history, given their legacy approach to underwriting.

It was therefore clear to us that we needed to offer lines of credit for our customers. Our credit facility allows us to extend lines of credit to our customers, ramp up our product offerings rapidly, and incorporate that debt into our capital stack in a way that minimizes the long-term cost of capital, which that makes clear sense for our business .

To expand our offerings, I turned to alternative financing: In October 2021, we closed a $ 77 million funding round, of which $ 75 million was a revolving credit facility and the remaining was in equity. Later this year, we’ll finalize an all-stock acquisition to further enhance our technology and product road map.

How we did it

For our business model, raising a credit facility to fund all of the spend for our customers made the most sense.