Venture Debt & Growth Finance Explained
Venture debt is a loan product offered by some banks and other lenders. These types of loans are for growing companies where there is more risk than a traditional bank loan would work. They can involve a higher interest rate, different types of fees, and equity warrants to allow the lender to benefit from the upside in highly successful companies.
In recent years more options around Growth Finance have become available. Revenue-based finance provides an option for SaaS founders where the loan is repaid with a percentage of monthly revenue, with a set cost. SaaS companies can leverage recurring revenue venture debt to grow their business without warrants, prepayment penalties, persona guarantees, or equity dilution.