How Venture Debt Benefits a Capital Structure
Venture debt benefits a company’s capital structure first and foremost by having saving dilution for the team. And what that means is at the exit for the company the entrepreneurs–the guys who are working the really late hours and doing all the hard work–those guys will have more money in their pockets if they use venture debt than if they don’t.
It’s a very patient source of capital on a company’s balance sheet. It’s not generally subject to material adverse change language or covenant defaults like you would find in a bank, so it’s patient capital, it does have to be repaid but properly used it’ll save the people doing the work– the management team working late hours—money, and they’ll be personally more wealthy at the exit than if they don’t use it.
Meet Tim O’Loughlin, Eastward Capital Partners Investment Partner.
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