Growth companies have strong future potential revenue and reliable historical revenue streams along with a positive and building trend. The reliability and repeatability of profitable operations through organically growth or via acquisition depends upon management, the business, and the industry. When these key factors are in alignment, the ongoing cash flow and or profits are a financeable asset, particularly in conjunction with tangible short and long-term assets such as receivables, inventory, equipment, property, and buildings.

Venture Lenders' criteria and debt pricing can vary widely, particularly between banks, non-bank and private debt lenders. Venture Lenders have specific due diligence financing criteria, sector specialization, and conventional to risk financing ROI hurdles in evaluating opportunities. Other factors include  management track record, deal size and security coverage. 

Venture Debt – Venture debt often focuses on companies with high growth, intangible assets, and have not yet achieved enough cash flow to support their growth.

Common challenges:

  • Negative cash flow
  • Heavy capital expenditures
  • Not enough working capital
  • Losses
  • Thin margins
  • Industry
  • Lack of enduring, repeatable revenue
  • Cash businesses
  • Not enough equity
  • Lack of history
  • Customer profile and concentration 
  • High fixed expenses
  • Lack of detailed financial forecasts
  • Intangible assets

Solution

Venture debt financing is challenging, making it necessary for an in-depth presentation with appropriately detailed financial forecasts that articulate the ability to make repayment over a short to medium-term timeframe. Because of the potential that revenue and cash flow can “dry up”, the financing case must address the certainty of continued operations and cash flow generation. There are specialized lenders that focus on venture debt and they place greater reliance on forecasts over historical performance. 

We identify the likeliest financing scenario, expected pricing, and most suitable lender(s). Building a lending case, we draw on our previous experience within this financing class and drill down into the details to ensure alignment with each prospective lender and solution.

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