Venture Debt

An explanation of Enterprise Value as the total cost to acquire a company, including debt and cash, tailored for founders navigating valuation and exits.

Debt financing involves borrowing capital rather than selling ownership. This article explores the mechanics of debt, the trade-offs with equity, and the risks of leverage.

Senior debt is borrowed capital that takes repayment priority over other debts. It offers lower interest rates but requires collateral and strict repayment structures that impact future financing.

A loan covenant is a rule attached to debt financing. This article explains the types of covenants, financial ratios, and the consequences of tripping a technical default.

Venture debt is a loan for VC-backed startups used to extend runway and minimize dilution. It serves as complementary financing to equity but comes with repayment obligations.

A bridge loan fills the gap between financing rounds. This article defines the term, outlines when to use it, and explains the risks of bridging to nowhere.

Basis points are a unit of measure for small percentages. This guide explains how to read them and why they matter for interest rates and equity.

A straightforward explanation of loan covenants, detailing how affirmative and negative promises impact startup flexibility and lender relationships during debt financing negotiations.

Principal is the original sum of money borrowed or invested. Understanding how it differs from interest and how it behaves over time is critical for managing startup cash flow.

Warrant coverage is the percentage of a loan value issued as options to a lender. It acts as an equity sweetener in venture debt deals to lower immediate interest rates.

Subordinated debt is a loan ranking below senior debt in repayment priority. It offers capital without immediate equity dilution but carries higher interest rates and risk.

Warrants are rights to buy stock at a specific price used to sweeten deals. This guide explains their mechanics, difference from options, and role in fundraising.