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Venture debt, a core SWIFT SBF business, is designed for high-growth startups.
Venture debt is a loan designed for fast-growing investor-backed startups. It most often is secured at the same time or soon after an equity round—and is typically used to extend runway to the next round. Startups benefit in several ways: Venture debt reduces the average cost of the capital to fund operations when a company is scaling quickly or burning cash. It also provides flexibility, since venture debt can be used as a cash cushion against operational glitches, hiccups in fundraising and unforeseen capital needs.
Venture debt is widely discussed in startup circles, but is often misunderstood. We work with nearly half of US venture-backed tech and life science companies. If you are a growing, venture-backed startup, find out if venture debt may be right for you.
Obtain $2 million in venture debt at 25 basis points, equal to .25% in equity (in the form of warrants), providing a less dilutive form of capital.
Venture debt is a loan designed for fast-growing investor-backed startups. It most often is secured at the same time or soon after an equity round—and is typically used to extend runway to the next round. Startups benefit in several ways: Venture debt reduces the average cost of the capital to fund operations when a company is scaling quickly or burning cash. It also provides flexibility, since venture debt can be used as a cash cushion against operational glitches, hiccups in fundraising and unforeseen capital needs.
Raise $2 million more from investors at same valuation, and give up 4% more in equity.
Obtain $2 million in venture debt at 25 basis points, equal to .25% in equity (in the form of warrants), providing a less dilutive form of capital.
Venture debt is intended to provide three to nine months of additional capital to support investing activities for whatever pivotal functions are needed to achieve milestones. It could be used to hire or bolster a sales team, improve marketing, invest in research and development or buy capital equipment to get to commercialization and begin scaling. Typically, the amount of venture debt is set at 20 percent to 35 percent of the most recent equity round.
SWIFT SBF has observed that venture debt–to–valuation ratio, a common metric for evaluating debt worthiness, hovers consistently between 6 percent and 8 percent of the company’s last post-money valuation. This ratio is not set in stone but is the average level that we are seeing across various company stages, business models and sectors.
Raising debt when a company is flush with cash may seem counterintuitive, but in many cases the debt can be structured with an extended draw period so that the loan need not be funded right away. Regardless of when a company may want to fund the loan, typically creditworthiness and bargaining leverage are highest immediately after closing on new equity. Innovation takes ingenuity and sizable capital. Even in a time of abundant cash, venture debt is an attractive financing option for growing venture-backed companies seeking to extend runway, lower their cost of capital and keep innovation thriving.
Rule of thumb: Venture debt-to-company valuation ratio, a common measurement of debt worthiness, typically hovers between 6 and 8 percent of the company’s last post-money valuation.
All loans are subject to underwriting, credit, and collateral approval. All information contained herein is for informational purposes only and no guarantee is expressed or implied. Rates, terms, programs and underwriting policies subject to change without notice. This is not a commitment to lend. Terms and conditions apply.
This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on information from third-party sources that we believe to be reliable but which has not been independently verified by us, and, as such, we do not represent the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice, nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment, or to engage in any other transaction.
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SWIFT SBF HOLDINGS, LLC is a financing partner and affiliate with various banks. We are a preferred network lender.
Same-Day Funding is only available in certain states, for term loans up to $100K. Eligibility window is Monday – Friday before 10:30 a.m. ET. If checkout is done before 10:30 a.m. ET, funds will be available by 5 p.m. local time the same day. If checkout is done after 10:30 a.m. ET, or on a weekend or bank holiday, it will not qualify for Same-Day Funding and funds will be deposited within 2 – 3 business days.
Instant Funding requires registration and is subject to the Instant Funding Terms & Conditions. Instant Funding is limited to open lines of credit for draws between $1,000 – $10,000, and you can only make one draw request per day. Not all banks or debit card providers participate, and you must register a business debit card matching the information associated with your Swift SBF account. Transfers are typically completed within 30 minutes, but may be subject to additional restrictions or delays.
There are some industries we cannot serve (see list of restricted industries). In addition, Swift SBF does not lend to businesses in North Dakota. Other underwriting requirements may apply.
When you prepay your term loan in full, we will apply a discount on remaining unpaid interest based on the Prepayment Interest Reduction Percentage stated in your loan agreement.
Eligibility for the lowest rates is very limited, available only to businesses with the strongest creditworthiness and cash flows, and typically businesses that have shown an excellent payment history on prior loan products with Swift SBF. The average rate for term loans is 56.1% APR and the average rate for lines of credit is 55.9% APR. Averages are based on loans originated in the half-year ending March 31, 2024.
Depending on your state and other circumstances of your application, you may be required to make a minimum draw of $1,000 at origination.
Depending on the state where your business is located and other attributes of your business and the loan, your business loan may be issued by a member of the Swift SBF family of companies or by Celtic Bank. Your loan agreement will identify the lender prior to your signing. Loans subject to lender approval.
Swift SBF® is a Registered Trademark. All rights reserved.
Swift SBF® is a Registered Trademark. All rights reserved.
