The Find Venture Debt Blog

Venture Debt Is Not What It Used To Be...and That's Good News for Potential Borrowers!

9/5/2018

If you ask someone to name a venture lender, the odds are very high they will say Silicon Valley Bank, Square 1 Bank, or one of a few others (if they can name any at all).  This narrow view of venture debt persists despite the tremendous increase in the types of loans and number of lenders in the market.

Financing innovations such as the MRR line of credit (based on monthly recurring revenue) and revenue-based financing have broadened the pool of qualified borrowers.  In addition, the entry of business development companies (BDC), hedge funds and other institutional investors into the market have increased the pool of available capital.

This expansion has been so broad that the term “venture debt” and its common definitions are much too narrow.  As a result, some industry participants and observers have begun to use the term “growth debt” instead of “venture debt.”

What do these changes mean for potential borrowers?

  • Venture debt is available at all stages of development except the idea/concept-stage.*

  • Venture debt is available to both VC-backed and non-VC-backed companies.

  • Venture debt is available to both technology and non-technology companies.

  • Venture debt is available in amounts ranging from $250,000 to $100+ million, although most lenders focus on loans of $1 million to $20 million.

The well-known venture debt providers still offer a low-cost alternative to raising equity.  However, if your company does not meet their lending criteria or needs more flexible borrowing terms, there are many minimally-dilutive or non-dilutive funding alternatives.

____________________

*   Generally, venture debt is not available for companies at the idea-stage or seed-stage.  Exceptions include pre-revenue life science companies backed by well-known venture capital firms and SaaS companies with at least $200,000 in annual revenue.

...