Raising Capital · Venture Debt
Venture debt: the terms at a glance
A one-page summary of current venture debt terms. For the full explanation and the decision framework, follow the links below.
By Harry Prabandham · Updated November 2, 2026
The short answer
Venture debt is a term loan for venture-backed companies, usually taken shortly after an equity round to stretch runway, often by about six months, with much less dilution than equity. Expect a loan of about 25% to 35% of your last round, a 3- to 4-year term, a floating rate, warrants worth 5% to 15% of the loan, and covenants. It helps when you have a clear path to the next milestone and hurts when revenue is uncertain and repayments start before you get there.
Typical terms in 2026
| Term | Typical | Note |
|---|---|---|
| Loan size | Commonly 25% to 35% of your last equity round | First Citizens/SVB guidance ranges from 20% to 40% |
| Term | Commonly 3 to 4 years | Some lenders go to 5 |
| Interest-only period | Commonly 6 to 12 months | Longer on larger deals |
| Interest rate | Floating, prime plus a spread, with a floor | Prime was 7.00% in October 2026; a large lender reported 7% to 14% across its book |
| Warrants | Commonly 5% to 15% of the loan amount | 3% to 20% outer range; strike usually at the last round price |
| Fees | End-of-term payment around 3.5% to 6.5% of the loan | Plus an origination fee and possible prepayment fee |
| Covenants | Minimum cash, material adverse change, investor support | These can let the lender call the loan or freeze the undrawn amount. Push for objective triggers, or a facility without financial covenants |
Who qualifies
Lenders lend against your investors' backing more than your assets. They typically want a recent round from institutional venture investors (usually Series A, or a larger seed), at least 12 months of runway from your own cash, and increasingly, revenue they can see: retention, margins and a credible plan.
When it helps, and when it hurts
The clauses that bite are a material adverse change clause and an investor support clause: if the lender decides your business has deteriorated or your investors won't back you, it can call the loan or refuse further draws, often right when you need the cash. Negotiate objective triggers, and model a flat-revenue year before you sign.
- Helps: extending runway to a milestone that lifts your next valuation, funding equipment or working capital, or avoiding a small, dilutive equity bridge.
- Hurts: when it replaces equity you really need, when repayments start before revenue arrives, or when covenants such as minimum cash can be tripped in a slow quarter.
Since Silicon Valley Bank failed in 2023, the market has spread across banks and non-bank lenders, and volume hit a record $68.8 billion in 2025. More lenders means more choice, so compare covenants and fees, not just the rate.
Go deeper
- Venture Debt ExplainedThe full guide: how it works, who lends, and how it is structured.
- Venture Debt: When (and When Not) to Take ItThe decision framework and the stress test.
- Warrants ExplainedWhat warrant coverage means for your cap table.
- Revenue-Based Financing vs Equity vs DebtWhich capital source fits when.
Frequently asked questions
›How much venture debt can a startup raise?
Lenders commonly size venture debt at 25% to 35% of the company's last equity round (guidance ranges from 20% to 40%), and want to see the company has at least 12 months of runway from its own cash, with the debt adding about six more.
›What is warrant coverage in venture debt?
Warrants give the lender the right to buy a small amount of stock, usually at the last round's price. Coverage is stated as a percentage of the loan, commonly 5% to 15%: a $5M loan with 10% coverage gives warrants to buy $500,000 of stock.
›Who provides venture debt after SVB?
Banks (including First Citizens, which acquired Silicon Valley Bank, and HSBC Innovation Banking) and non-bank lenders such as business development companies and private credit funds. No single lender dominates as SVB once did, and US venture debt reached a record $68.8 billion in 2025.
›What is the difference between revenue-based financing and venture debt?
Venture debt is a term loan sized off your last equity round, with fixed monthly payments after an interest-only period, plus warrants and covenants; it needs institutional venture backing. Revenue-based financing is an advance repaid as a share of monthly revenue until a fixed multiple is paid back, with no warrants and usually no venture backing required, so it suits companies with steady recurring revenue. Venture debt is usually cheaper; revenue-based financing flexes with revenue.
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About the author
Harry PrabandhamFounder & CEO
Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.
More articles by Harry →Sources and attribution
- First Citizens Bank (SVB), "How much venture debt is right for you"
- Hercules Capital, Form 10-K for 2025 (SEC)
- Federal Reserve Bank of St. Louis, bank prime loan rate (DPRIME)
- Runway Growth Capital and PitchBook, 2025-2026 Venture Debt Review
- PitchBook, "One year after SVB, the throne sits empty" (March 2024)
Typical terms vary by market, stage and investor, and change over time. This guide is general information about how these instruments work, not legal, tax or investment advice.
