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How does Venture Debt work?

Venture debt (or growth debt) is a lending arrangement typically offered by specialist funds to venture capital-backed but still loss-making high growth technology, life sciences, or similar businesses. Loan providers effectively agree to largely cap their returns (hence reducing the dilution vis-a-vis venture capital financing) but in return require to be the first in line (taking a senior secured position) in the repayments waterfall. Minimum business size and the facility requirements typically apply (e.g. loans are likely to be 1m+, whereas revenue-based financing can be from 10k+).

Typical venture debt arrangement consists of:

  • 3-year monthly amortising (can include an interest-only period in the beginning) senior secured term loan, with a fixed interest rate

  • Likely would include negative covenants and sometimes also financial covenants

  • A warrant agreement, giving the debt provider the right to acquire a small portion of shares at the current valuation, exercisable at a liquidity event (a sale of the business or an IPO). This gives away some equity upside but reduces the cash costs of a loan

  • Upfront and back-end fees

Venture Debt providers

News & Resources

Exicure Secures Debt Facility for Up to $25.0 Million - Business Wire


Kiadis announces the placement of €5 million convertible bonds with Kreos - Yahoo Finance


Berlin-based Infarm raises €144 million during pandemic to grow largest urban vertical farming network in the world - EU-Startups


Scope Fluidics Secures €10M Loan From European Investment Bank - 360Dx


EIB offers EUR 10-mln loan to Polish medical researcher - The First News


Israeli asset manager Viola Credit bolsters MarketFinance CBILS lending by £50m - AltFi


Harbert European Growth Capital Fund II provides Butternut Box with debt capital - Business Leader


Selecta Biosciences Secures Up To $35 Million Debt Financing with Oxford Finance LLC and Silicon Valley Bank - GlobeNewswire


FireMon Secures $40 Million Debt Financing with Silicon Valley Bank - Security Boulevard


CEFC backs last mile delivery e-bikes amid a booming market - The Fifth Estate


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