ShaneMcLean.com

Information on legal and business topics from Canadian business lawyer Shane McLean

From Wellington Financial — 5 pre-deal questions to ask your venture debt lender

Posted by Shane McLean on October 28, 2009

There is a  good article at the Wellington Financial Blog with a list of questions your should consider asking your “venture debt lender” in the early stages of discussion (see the article here).

For those of you who are not familiar with the term “venture debt lender”, the term is generally used to describe non-bank lenders that operate in the same or similar market as traditional venture capitalists.  Wellington Financial is an example.   Venture debt lenders typically offer a secured debt facility (that they expect to be paid back on set terms) and take some warrant or other equity incentive on the side.  Interest rates are generally higher than you would get from your traditional  bank but that is usually a factor of the level of risk these lenders take and the amounts loaned which are both generally higher than those a traditional bank would tolerate.

If looking at venture debt as a source of funding,  be prepared to discuss quasi-bank style financial covenants with your venture debt lender.  That typically rules out pre-revenue early stage borrowers.

Advertisements

2 Responses to “From Wellington Financial — 5 pre-deal questions to ask your venture debt lender”

  1. The Journal of Corporation Law recommends the following article related to this blog post:

    Charles K. Whitehead, The Evolution of Debt: Covenants, the Credit Market, and Corporate Governance, 34 Iowa J. Corp. L. 641

    Available in downloadable PDF At: http://www.law.uiowa.edu/journals/jcl/pastissues.php

  2. […]     From Wellington Financial -5 Pre Deal Questions to ask Your Venture Debt Lender (October 28, […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: