Why Tractor?
The Australian tech sector is relatively young, so there haven’t historically been many options for companies seeking capital, especially for short-term growth. Typically they have to sell equity in one way or another – through angel rounds, friends-and-family funding, or equity crowdfunding, for example.
At seed- to Series A-stage, bank loans are usually not an option, either.
But not every business is well suited to equity funding or venture capital. Not every founder is seeking the rocket-ship growth and 100x returns that many investors are looking for.
And while investors bring value to a business, if founders are giving up equity, it should be for the right reasons, and on their own terms.
Debt funding is not an objectively better option for tech-enabled companies, or for founders. It’s simply another tool in the toolkit; something that can be used instead of equity funding, or alongside it, to achieve different objectives at different times.
Imagine a hypothetical SaaS startup, operating in a niche industry, that has spent three years bootstrapping and building relationships with key users in its market.
After fine-tuning and developing the product over time, the founders feel they have capacity to support more customers. So they decide to hire a specialist sales professional – someone they already have their eye on – who is knowledgeable in the sector, and has great connections.
The founders estimate that the cost of onboarding plus the first six months of the employee’s salary will cost about $60,000. They want to hire straight away, but their payment cycles are annual, and a chunk of renewal revenue is expected in three months’ time.
The founders choose to borrow $60,000 over a three-month loan term, allowing them to onboard their new hire as quickly as possible.
With any luck, the total cost of the loan will be offset by all the new customers coming in the door.
Loan: $60,000
Annual percentage rate: 20%
Loan term: 3 months
Total interest: $2,010
Monthly repayments: $20,670
Total repayment: $62,010
Startup: Gathera (formerly Urban Plant Growers)
Founders: Dilhan Wickremanayake and Peter Cole
Location: Sydney
Gathara creates hydroponic vertical farms for use in commercial and private kitchens, and it’s fueling growth using a combination of debt and equity funding.
This is an ecommerce business, shipping high-tech and expensive bits of kit. So when it came to building inventory, Tractor funding was the perfect solution.
Later, Gathera raised $1 million in equity crowdfunding, from its incredibly engaged community of customers and followers.
That funding was mostly pegged for long-term investment in research and development.
“You’ve got physical assets; you’ve got to think about storage; you’ve got to think about actually moving these things around; you’ve got to think about the labour to do all of that; you’ve got to think about how the products can get damaged, and how to store them safely.” – Dilhan Wickremanayake
“If we can invest a dollar in manufacturing and turn that into $5, we’ll be able to pay back the loan in three to five months, after we do that manufacturing run.” – Peter Cole
What’s next?
Once you have an idea of what you could borrow, apply here to set up your company profile and access an automated assessment based on your financial information – you can connect your accounting system to ours, so we can make our assessment as quickly as possible.
Our team are in touch within one working day, as we answer any questions you have, and help you scale strategically from there.
Next, try our business loan repayment calculator
Find out more about the benefits of being part of the Tractor village
We'd love to chat and see whether Tractor is the best partner for you.
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