Venture Debt Definition
Venture Debt (or venture lending) is a type of debt financing for fast-growing technology companies by Venture Debt funds and specialist non-bank lenders like BOOST&Co.
The name is a mix of venture – as in venture capital – and loan, which describes the mix of returns from venture debt.
Most venture loans are amortising term loans.
Unlike bank loans, Venture Debt is available to startup and growth companies that do not yet have positive cash flows or significant assets to use as collateral. A venture lender assesses the enterprise value of the company it is lending to, rather than the accounting value of its assets.
Venture debt is a product made for companies which have achieved scale already, not early startups. This means that companies need at least £5M revenue run rate before they can have access to Venture Debt, although there are exceptions for biotech companies and companies with a high recurring revenue base and a very high gross margin.
Venture Debt funds look at the current and expected performance of a business, rather than historical balance sheets to assess if a Venture Loan is appropriate for a company.
Venture Loans are used to fund growth, working capital (stock, seasonal working capital), CAPEX (equipment purchase, software purchases) or merger and acquisition activities.
Venture Debt funds take more risk than banks because they lend earlier and lend more 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).
If you are a more mature company with a history of EBITDA generation, you may find that Growth Business Loans are most suitable.
Venture Debt by BOOST&Co
The team at BOOST&Co have been crafting Venture Debt solutions for more than a dozen years. We have completed more than 150 Venture Debt transactions over that time.
If you want to discuss how we can work together to create a Venture Debt solution, get in touch with us. The best way is to give us a call, or to leave us some information about your business.