Venture debt or venture lending is a type of debt financing provided to venture-backed companies by specialised banks or non-bank lenders to fund working capital or equipment purchases. Unlike traditional bank lending, venture debt is available to startups and growth companies that do not have positive cash flows or significant assets to use as collateral. Venture debt providers combine their loans with warrants, or rights to purchase equity, to ...
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Venture debt or venture lending is a type of debt financing provided to venture-backed companies by specialised banks or non-bank lenders to fund working capital or equipment purchases. Unlike traditional bank lending, venture debt is available to startups and growth companies that do not have positive cash flows or significant assets to use as collateral. Venture debt providers combine their loans with warrants, or rights to purchase equity, to compensate for the higher risk of default. For this reason, venture debt is sometimes considered a hybrid form of financing between debt and equity.
Venture debt is typically structured as one of three types:
The third type of venture debt is only available to companies that have received or are simultaneously taking on venture capital financing from a reputable firm. The lender effectively piggybacks on the due diligence done by the venture capital firm.
Venture debt has been available in the US since the founding of Silion Valley Bank (today...
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