Venture Debt is a way a business can obtain finance without giving away as much equity as venture capital may demand. It comprises a Loan and Warrants. The Warrant provides the investor with an opportunity to make a higher return if the investee company is successful. The Loan, which is made to a borrower that has a high growth rate, is designed to boost its progress and help it make what is called ‘a step change’ forwards.  It can be used to accelerate growth ahead of a key value generating event such as a future equity round, an IPO, or a trade sale. It can be used to part fund an acquisition, a management buyout or an IPO. Venture Debt is secured against the value of the company rather than specific assets, such as plant and machinery or a building. The borrower sells less equity than required under a Venture Capital investment however the Investor does not have to wait for an unknown period to release his monies as the debt must be repaid. Investors should note that this type of investment is considered high risk, investment returns are not guaranteed, and you may lose some or all the capital that you invest.
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