When Is Venture Debt Right for Your Startup?
Scaling a startup is hard. Raising capital shouldn’t slow you down or cost you control. That’s where venture debt comes in: flexible, founder-friendly financing designed to give you the runway to grow without giving up equity. Here’s how to know if it’s right for your business.
Key Takeaways
Venture debt is ideal for early-stage businesses that have typically raised $5M+ in a single equity round.
It provides additional capital without the same level of dilution as an equity raise.
Understanding the terms—especially warrants—is critical to protecting your ownership and long-term growth.
1. Who Should Consider Venture Debt?
Venture debt is for fast-growing, early-stage businesses—usually Series A onward—with strong investor backing. These companies are often cashflow negative and need capital to reach the next milestone before an exit or follow-on equity round.
Venture debt is equity-like without the dilution, giving founders more control while providing lenders comfort that your business is backed by reputable investors.
2. When to Take On Venture Debt
The best time to use venture debt? Often alongside or shortly after an equity round. Ideally, you should have 9–12 months of runway to ensure you can execute your plan.
Think of venture debt as a buffer or safety net: it can complement your equity raise, minimize dilution, and give you the confidence to grow without waiting on your next round.
3. How Venture Debt Can Be Used
Venture debt provides flexible capital to fuel growth without giving up equity. Common uses include:
Extending cash runway
Funding sales, marketing, and engineering
Expanding geographically or into new markets
Supporting bolt-on acquisitions
Bridging to profitability for later-stage companies
It’s a versatile tool for companies looking to scale strategically and efficiently.
4. Key Terms to Understand
Venture debt typically comes with a 4–5 year term and may include:
Interest-only periods (3–12 months)
Financing equal to 25–35% of an equity round
Upfront fees, interest, back-end fees
Warrants giving lenders potential upside without taking over your company
Unlike traditional bank loans, venture debt is designed to support growth, not restrict it. Warrants are one reason venture lenders can provide capital to riskier startups while keeping your ownership intact.
5. What to Expect & Watch Out For
The venture debt process usually takes 6–8 weeks: due diligence, term sheets, investor calls, and legal documentation.
Pro tips:
Understand the full cost of debt, including any dilutive warrants.
Avoid personal guarantees; lenders normally take a charge over company assets only.
Work with lawyers experienced in venture debt to negotiate the best terms.
Is Venture Debt Right for You?
If your startup is growing fast, backed by investors, and ready to scale without unnecessary dilution, venture debt can be a powerful tool to fuel growth and extend runway. Our venture debt funding process with our partners can take as little as seven business days from application submission to
At Forge Capital, we guide founders through the venture debt process with clarity and confidence. Our team of entrepreneurs and investors helps you structure financing that fits your business, protects ownership, and accelerates growth.
