Banking
Venture Debt
Quick definition
Debt financing for venture-backed startups, typically structured as a term loan with warrants, and it extends runway without immediate dilution.
Venture debt is term-loan financing (typically $1-50M) from specialized lenders (Silicon Valley Bank (now part of First Citizens), Hercules Capital, Trinity Capital). Structured as: 3-4 year term, monthly interest payments (prime + 2-6%), 10-30% warrant coverage. Common after a Series A/B to extend runway without diluting further. Less risky than raising equity but introduces fixed obligations and covenants. Use for clear, financeable expansions (sales hires, marketing programs) rather than basic burn extension.
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Insights, guides, and tools where Venture Debt shows up.
Frequently asked questions
- What is Venture Debt?
- Venture debt is term-loan financing (typically $1-50M) from specialized lenders (Silicon Valley Bank (now part of First Citizens), Hercules Capital, Trinity Capital). Structured as: 3-4 year term, monthly interest payments (prime + 2-6%), 10-30% warrant coverage. Common after a Series A/B to extend runway without diluting further. Less risky than raising equity but introduces fixed obligations and covenants. Use for clear, financeable expansions (sales hires, marketing programs) rather than basic burn extension.
- Why is Venture Debt important for startups?
- Venture Debt is a banking concept that matters for startup founders because it shows up in fundraising readiness, financial decision-making, and operational discipline at the stage where mistakes are expensive to undo. Founders who understand it are better prepared for diligence, board meetings, and investor conversations.
- What category does Venture Debt belong to?
- Venture Debt is a Banking term in the StartupCFO finance glossary, alongside other banking concepts that founders, CFOs, and accountants use in startup operations and reporting.
- Where can I learn more about Venture Debt?
- Beyond this definition, see the related banking terms below, or explore StartupCFO's insights and tools that put Venture Debt in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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