How SaaS companies increase profits with lending

Lending is a growing opportunity for SaaS companies. Learn how SaaS lending works, the different types of lending SaaS companies offer, and how to start your own SaaS lending program.

What is SaaS lending?

SaaS lending occurs when software companies offer lending products to new and existing customers. While it’s commonly used to finance software purchases, it has a variety of other uses.

These include working capital loans to help customers cover everyday expenses, buy now pay later (BNPL) loans to finance large equipment purchases, or lines of credit and installment loans to help customers expand.

Why SaaS companies are perfectly positioned to offer lending products

SaaS companies don’t play the role of a typical B2B vendor. Instead, they are entrenched in their customer’s operations as a key system that helps them run their business.

This uniquely positions them at the heart of their customer’s business. Because they are frequently in touch with customers and need to maintain a good working relationship to ensure they renew their subscriptions, SaaS companies can easily offer lending products to help their customers thrive and grow.

What benefits does SaaS-based lending provide?

Offering lending products to SaaS customers can improve both the SaaS company’s and the customer’s economic position. Below are some of the main benefits a SaaS lending platform can provide.

1. Increased affordability and customer satisfaction

Offering financing can increase how much your customers can afford for your SaaS products. This can also boost customer satisfaction, as financing gives them more flexibility in what they can do with their funds in other areas of the business.

2. More sales and higher revenue

Financing a SaaS product can drastically reduce your closed-won sales rate and the dollar amount of each sale, as customers can use financing to pay for top-tier packages. This leads to higher revenue from increased sales and the interest on the loans you provide.

3. Reduced churn

When a customer finances your product and has to repay a loan in installments, they’re more invested than just paying a monthly subscription cost. During the loan period, customers may be less willing to abandon ship due to the sunk cost of the loan they took out for your product.

4. New revenue streams

Many SaaS companies break into embedded lending because it offers an exciting new way to increase revenue that isn’t purely product-based. Companies across many industries are getting into financial products to grow their bottom line.

5. Stronger customer relationships and brand loyalty

Helping improve your customer’s financial situation and giving them more options further strengthens your relationship as a core part of their business. This makes you all the more important to them and can increase long-term loyalty.

Types of SaaS lending

Embedded SaaS lending isn’t quite the same as going to a traditional bank to get a loan. Here are the types of lending that Canopy’s SaaS customers usually offer.

Financing for software-related purchases

This is the first area where a SaaS company might look to offer lending products because it can directly increase sales by providing customers with financing options that fit their budget.

Financing for equipment or other large purchases

Once you have an established relationship with a customer, you can offer other types of loans to help them achieve their goals.

Working capital loans

By offering working capital loans, SaaS companies help their customers with funds to cover everyday expenses. These can be either a line of credit or a short-term loan with fixed terms.

Invoice factoring and cash advances

Many businesses get stuck waiting for cash to hit their accounts while bills are piling up. To help them pay their bills on time, SaaS companies can offer loans based on expected incoming deposits.

Line of credit

Some SaaS companies can offer lending products similar to a traditional bank, such as a line of credit. This is a simple revolving credit that customers can access at any time, repay at a set interest rate, and then repeat when needed until the limit is reached.

The importance of flexibility in SaaS lending

One of the main reasons that businesses turn to SaaS providers for loans is because they offer speed and flexibility that traditional banks can’t offer.

How to get started with a SaaS lending platform

Canopy is a SaaS commercial lending platform that acts as the core of your lending program.

Integrating Canopy’s SaaS lending technology allows you to create a complete lending program through our product and integrated partners. You’ll be set up with a modern lending core with the ability to scale and, of course, a new revenue stream that will also help you close more deals.