About Venture Debt

Key benefits that venture debt offers to management teams of equity-sponsored companies include:

  • Preserves control and economic upside for investors, founders and employees, and is the least dilutive financing option
  • Extends the cash runway of the company and supports the achievement of upcoming value milestones
  • Offers a “bridge” between equity rounds - rather than issuing equity to finance upcoming growth, the company may be able to raise equity at a higher valuation after a key milestone has been achieved (thus further minimizing dilution)
  • Supplements an existing equity round, allowing venture capital investors the ability to both leverage their investment – and preserve dry powder for future needs of the company

Venture debt structure (characteristics of a typical venture debt loan):

  • Par amount – up to $50M or potentially greater with specific lenders and/or syndicates
  • Total duration – up to 60 months
  • Amortization structure – initial interest-only period up to 36 months, with level amortization thereafter
  • Coupon, facility fee, and final payment fee – cost should be evaluated on all-in basis
  • Warrants or success fee from 2-4%
  • Security – typically a lien on all assets, other than intellectual property; negative pledge on intellectual property (other company-specific structures or carve-outs may be included)

Additionally, companies may be able to arrange lines of credit secured by accounts receivable, inventory, or PP&E.

Bridge Bank is one of only a few commercial lenders who has deep expertise in venture debt lending, and offers the flexibility in terms of deal size, repayment (duration, interest-only period), and cost structures (coupon, fees) that management teams need in order to maintain access to capital throughout the ups and downs of the growth cycle.

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