What factors do lenders consider when deciding whether to give venture debt to a company?
For private companies, a very important factor for venture debt providers is the quality and makeup of the investors, who are typically VC funds. Deals backed by VC funds (who have experience with using venture debt and are known to protect lenders even if their company does not work out) are likely to attract very strong terms from lenders. Other factors include the strength and track record of management teams; the amount of debt sought versus the amount of other capital in the deal (lenders typically lend less debt than the total equity capital in the deal); uses of capital and quality of the business plan; financial state of the company; and how much capital the company has in hand when seeking debt. What terms and structures are most commonly used? Often, venture debt is structured as a growth capital loan with a term loan structure of monthly amortization of principal plus interest over a specific amount of time, such as 36 months. How expensive the debt is varies considerably be
