Venture Debt

Venture Debt is a form of debt financing provided to early- and growth-stage startups that have already raised equity capital but may not yet be profitable or have sufficient assets for traditional loans. Unlike equity financing, venture debt allows startups to secure capital without diluting ownership stakes.

Venture debt is typically structured as a term loan, revolving credit facility, or equipment financing, often accompanied by warrants (options to purchase company stock) to provide additional upside for lenders. It is often used to extend runway between funding rounds, finance capital expenditures, or bridge financing needs during scaling.

Key characteristics of venture debt:

• Lower cost of capital than equity.

• Fixed repayment schedules.

• Often secured against company assets or future cash flows.

• Used to complement equity, not replace it.