Venture Capital Thru Non-Dilutive Debt
Access growth capital while minimizing dilution. Accrefi is the startup community’s trusted advisor when they seek venture debt lenders to fuel growth.
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Growth Funding for Startups and Established Companies
Minimal Equity Dilution
Non-dilutive funding
Interest-only Periods Aligned with Growth
Connect to Top Venture Debt Firms
We Bring Multiple Venture Debt Providers to You!
Lending Parameters for Venture Debt
Term Length & Structure
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18–60 months typical; most loans have an interest-only period
Amortization can be structured to match expected cash profitability trajectory
Loan Amount
$500,000 – $50,000,000+, depending on lender, company revenue, and invested capital from venture capitalists (VCs) or private equity (PE)
Parameter
Details / Typical Range
Underwriting Criteria
Post Series A funding all the way thru pre-IPO stage
Backed by institutional venture capital and private equity sponsors
Loan amounts sized as a ratio of prior venture financing or private equity backing, typically between 30-60% of recent investment
Revenue consistency, growth trajectory, and profitability will enhance risk profile
Use of Funds
Growth initiatives
Market expansion
Working capital
Security
Secured by liens on assets
Senior or subordinated structures
No personal guarantee
Covenants
Covenant light
Traditional debt leverage and FCCR ratios not relevant
Performance covenants centered around revenue or growth
Principal Amortization
Common to have interest-only for 6-24 months
Time to Funding
30 days or less for plain vanilla deals
Funding Cycle
Funding may occur in tranches, triggered by completion of subsequent events. I.e. equity round completion, revenue milestone, etc.
Typical Providers
Top venture debt lenders include:
Pure-play venture debt firms
Private credit funds that have a venture focused lending arm
Venture groups of banks (often referred to as “Technology” or “Innovation” lending within the bank)
Mezzanine shops
Specialty lenders
Eligibility
Must be revenue-generating, profitability helpful but not a requirement
US, Canada, Europe, or Australia based
Acquisitions
Recapitalization
Strategic investments
Interest Rates
Varies by lender and company profile with both fixed and floating rate options
Cash interest between 8-13% depending on security
Paid-in-kind (PIK) interest in some deals
May have warrants that participate in nominal amount of upside at time of exit
Repayment often aligned with revenue performance
Process
Gather historical financial statements of borrower, including monthly income statement, balance sheet, and cash flow for last 3 years.
Forward projections for 3-5 years
Document recent capital injections from VCs and PE
Assemble business, financial, legal, regulatory, industry, customer, and supplier information into data room (large undertaking)
Negotiate terms of loan facility
Lenders need to meet major shareholders of companies to understand contingency capital plans before closing loan
Who Can Benefit from Venture Debt?
Venture debt in United States is best suited for companies that are Series A or later, or growing mid-market companies seeking growth capital without diluting equity or ceding control. Typical candidates include:
Growth-Stage Companies
Businesses with established revenue ($3M+) looking to fund expansion, marketing campaigns, hiring, or new product lines can leverage venture loans for timely growth capital.
Recently Funded Equity or Pre-IPO
Firms that recently raised a meaningful equity round from private equity, venture capital, or family offices can amplify the capital base by layering venture debt financing to extend their runway.
Lower Middle Market Businesses
Companies that are EBITDA positive but smaller than the borrowers cash flow lenders usually issue loans to can tap into venture debt lenders to support their capital needs. This includes companies generating between $1-2 million in EBITDA (smaller than the strike zone of most senior and subordinated cash flow lenders).
Recurring Revenue Companies
SaaS, subscription-based, or e-commerce businesses benefit from venture debt providers that offer repayment schedules aligned with predictable revenue streams.
How Does Venture Debt Differ / Compare?
Accrefi works with growth stage companies to identify the right venture debt lender based on business model, industry, revenue performance, and ownership profile. How are venture loans similar and different from other debt solutions in the market?
Compared to Cash Flow Lending
Traditional cash flow loans are sized on historical EBITDA within leverage ratios caps. Venture loans, by contrast, will often accommodate limited or negative EBITDA if the borrower has sufficient equity capital from institutional investors and a credible growth plan. While both cash flow lenders and venture debt providers may lend to companies with limited hard assets, venture lenders place greater emphasis on sponsor backing, revenue trajectory, and access to follow-on equity. A number of venture debt companies are cash flow lenders that have dedicated strategies for technology and earlier-stage growth businesses.
Compared to Mezzanine Loans
Venture debt structures share two main similarities to mezzanine loans. First, venture lenders will defer or backload the loan repayment to allow borrowers to redirect cash flows towards growing the business on the front end. Secondly, some venture debt providers are comfortable subordinating behind a senior lender that extended an asset backed line or working capital facility to the borrower. Unlike a mezzanine loan, venture loans are not sized based on cash flows of the borrower, but rather a ratio of the VC capital that was invested.
Compared to RBF
Venture debt financing can take the form of a term loan or working capital line when a startup simply needs a tool to manage the fluctuations in expenses versus revenues. Companies that have software subscription models and recurring revenues can turn to a subset of revenue based lenders as an option to seek venture debt lines with speed and efficiency. Expediency of closing is attractive, however its important that the startup does not land itself in a term that is too short and demands repayment before the borrower can realistically service it. Accrefi can help you identify the right lender for the right venture loan.
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Benefits of Venture Debt
Venture debt offers strategic advantages for early stage and growth companies to fund growth efficiently:
1. Cheaper Than Equity
Companies can secure capital through venture debt providers without giving up large ownership ownership stakes. Even with nominal warrants, the cost of capital is significantly below equity.
2. Favorable Repayment Terms
Venture loans can fund expansion, acquisitions, marketing, or hiring initiatives while adapting repayment schedules to maximize redeployment of cash flows back into the business.
3. Extend Capital Runway
Firms that have raised equity rounds can use venture debt financing to extend runway, invest in growth, or finance acquisitions without further dilution.
4. Retain Control
Unlike venture capitalists or private equity capital, venture debt lenders do not seek board representation. They are lenders in the true sense of being a passive financial partner, allowing entrepreneurs to continue executing their vision with autonomy.
5. Reach The Next Milestone
Smart founders know that by deferring the acceptance of a priced equity round for as long as possible helps maximize shareholder returns over the long run. Venture debt amplifies the business’s capacity to grow, allowing it to reach each subsequent milestone while preserving shareholder equity.
Why Choose Accrefi for Venture Debt
We are not lenders, but Accrefi is the only venture debt company you need to know. Instead, we connect growing enterprises with multiple institutional venture debt lenders, ensuring our clients don’t get locked into one lenders’ unfavorable terms.
Extensive Lender Network
We reach beyond the usual suspects in the venture financing world to identify over 500 debt providers, including top venture financing firms. Often the answer lies in private credit shops, mezzanine lenders, cash flow lenders, and specialty lenders that have started a venture financing arm. Our network ensures competitive terms and tailored structures.
Strategic Advisory
On most of our assignments, we secure multiple term sheets, allowing you to evaluate multiple loan structures so you select the best venture debt provider for your growth goals.
Tried-and-True Process
Our process streamlines lender comparisons, documentation submission, and underwriting review, reducing time and friction in securing a venture loan in United States.
Borrower First
We are beholden to no lender, only to you as our client. We provide objective guidance on repayment terms, lender expectations, and strategic use of funds. We advocate for borrowers at all stages of venture debt fundraising process.
