Venture Debt

Venture capital

In contrast to classic equity financing, venture debt is an atypical form of debt financing. Equity is available to the start-up permanently and without further conditions. Debt capital, on the other hand, is repayable and limited in time, for which interest is usually payable.

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In addition to the interest component, lenders often demand a variable compensation component in the form of so-called "warrants". This gives the lender the option to subscribe to a certain number of shares in the company.

As with conventional loans, start-ups must also provide extensive securities to the venture debt lender. Typically, this involves pledging accounts and IP rights, assigning certain receivables or transferring assets as security.