5/1/2023 0 Comments Venture debtLease financing is a type of financing where the owner of the asset leases such assets (i.e. The interest rate is usually 0-4% higher than traditional loans to compensate for the increased risk to the lender. They can be used for runway extension, acquisition financing, project financing, growth capital, or equipment financing. Venture term loans are generally structured as three-year loans (or series of loans) with warrants for equity. This means that the inclusion of incremental capital from a loan allows startups to achieve greater progress between rounds, increasing the company’s valuation ahead of the next equity financing, and helping startups meet their milestones. Valuation of startups proceeds in a stair-step fashion between financing rounds. Venture debt has benefits for both entrepreneurs and investors. The market for such lending in the Middle East is still in its infancy, but we envision growth in the sector in the near future. Venture lenders have emerged to fill this gap such lenders can be individuals, venture capital investment companies and funds, or banks specialized in venture lending. Traditional lenders are often reluctant to finance equipment for startups based on the widely-accepted notion that startups have a high rate of failure. Venture debt is available for companies that lack assets or positive cash flow, or that want greater flexibility in the lending terms. ![]() ![]() The main difference between venture debt and traditional debt financing is that: Venture debt is an attractive form of raising capital for startups, because it can usually be arranged much more quickly, which might be an important consideration for startups facing a limited runway. It can be used instead of, or in conjunction with, equity financing. Venture debt is a form of debt financing that can be used by early and growth-stage startups to raise capital.
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