What is venture lending?
Venture lending is a complement to venture capital where companies can establish lines of credit and borrow money even though they would not otherwise be creditworthy from a traditional banking perspective. Startup companies use debt to leverage the equity they have raised, enabling the equity to last longer and be used more productively. Debt is considerably cheaper than equity from a shareholder dilution perspective and by financing certain expenditures, companies can save their expensive equity dollars for other uses. Many companies use credit lines to finance their capital equipment expenditures, software purchases, as well as soft costs like tenant improvements, mask sets, and tooling. Companies may also borrow funds for general corporate purposes. Typically companies can establish credit lines for as much as 30% to 40% of the equity that have raised. .
