Venture Debt by BOOST&Co

Defining Venture Debt

Venture debt is a type of debt financing aimed at fast-growing technology companies, by venture debt funds and specialists non-bank lenders such as BOOST&Co. The name is a mix of venture – as in venture capital – and loan, which describes the mix of returns..

Venture debt does not involve equity dilution. You read that right – you receive funds to grow your business, without having to sacrifice equity or control, or sign a single covenant. As entrepreneurs ourselves, BOOST&Co understands entrepreneurship and innovation. More importantly, we understand that when you’ve built a business from the ground up, the last thing you want to do is give part of it away. That’s why we’ve been providing these types of loans to innovative SMEs for a dozen years, and have invested in over 200 companies.

We offer funding of between £1 million and £8 million to rapidly growing technology companies. And we do so faster, earlier, and in larger amounts than traditional lenders. Our solutions are individually designed to suit your business, so long as you have an established business model and existing revenue run rate of at least £ 3 million. We make these loans from our own funds and, as such, our process lasts just 4 to 6 weeks.

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Venture Debt

Venture Debt 101

Venture debt is a product designed for companies that have already achieved scale, not early start-ups. To qualify, you need an established business model, clear growth prospects, and a revenue run rate of at least £3 million – although there are exceptions for biotech companies, and companies with a high recurring revenue base, and a very high gross margin.

Our funding is provided earlier and in larger amounts that traditional lenders. And not only do our solutions allow you to maintain your equity and control, they don’t require any covenants either. Finally, funding that allows you to grow without sacrificing all of your hard work.

Customised loans

Unlike bank loans, venture debt is available to start-ups and growth companies that do not yet have positive cash flows or significant assets to use as collateral.  When assessing your company, we will look at the enterprise value of your company, and at your current and expected performance; rather than historical balance sheets and accounting value of assets.

  • Size: £1 million to £8 million
  • Duration: 3 to 5 years
  • Process: 4 to 6 weeks to term sheet
  • Amortisation profile: Often includes a 6-12 month interest only period, after which the loan amortises.
  • Tranching: It can be funded in installments, to make the amounts amounts more relevant to the company’s funding needs and minimise interest costs early in the loan
  • Covenants: None usually.

All of BOOST&Co’s venture debt loans are individually crafted for each specific company and its unique situation.

Talking terms

If you’ve decided that venture debt is the growth capital solution that best suits your business, you’d probably like to know what the loan terms would look like. The price and terms of venture debt loans depend on the situation and company for which they have been developed, based on factors such as the business’ developmental stage and cash burn.

Venture debt funds take on more risk than banks, because they lend earlier and in larger amounts to high technology businesses. This means that venture lenders charge more for their capital – they are remunerated through a mix of debt returns (fees, interest) and equity upside (warrants or shares).

  • Fees: 1-2% of the loan amount
  • Interest rate: 10-12% of the outstanding capital
  • Equity kicker (typically a warrant): 10-20% of the amount lent

What our loans don’t include is the dilution of your equity, a loss of control, and the use of covenants.

For more information on our venture debt loan terms, download our Loan Term Sheet.

 

You are not alone

The uses are as varied as the companies that receive it. We have invested in companies that have used venture debt to fund growth, to fund the gap to break-even, or extend the cash runway before the next equity raise. Funds are used for working capital, CAPEX, and to finance merger and acquisition activities. The best way to understand how your company could use venture debt, is to look at the way others have used it. The following case studies highlight some of these uses, and you can find more on our blog.

 

Reach out

The team at BOOST&Co has worked with more than 500 innovative businesses, and provided funding in excess of £200 million. If you’d like to discuss a venture debt solution designed to suit your business’ needs, tell us about your business, and we’ll get in touch right away to introduce you to our fast and simple investment process.

 

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