We are pitching a few Venture Debt folks on a $500K tranche of debt. We are an early stage, Silicon Valley, venture-backed (~$1.5M raised so far from quality VCs), in revenue, internet company. I'm looking for current rates of interest (e.g. prime + X%), warrant coverage, and practice around security for the lender (e.g. assets, IP, etc.). Would greatly appreciate the help. Thanks.
Looking for current Venture Debt rates
Answers
The rates I got recently (slightly larger and further along company) were high single digits interest (prime + 6%, and prime is just over 3% now), facility fee of 2%, early termination fee of 3% and warrants a bit under 5%. This was for a $2.5M deal.
Recently my company had an unsolicited offer for some venture debt so we played it out to see what the deal was. 13% (prime plus 10%), facility fee of 2% AND a commitment fee of 5% (which would be put to the deal whether we pulled the money down or not), 5.5% warrants. All told, the economics were a 20% IRR, which was just too expensive. My prior venture debt deals that I considered "competitive" all came it between 11% and 14% IRR. Plus they had long interest-only periods, long take-down periods and no MAC clauses, so that you could get the money regardless of what your company looked like at the time. I mean, that's what venture debt is for anyway - to have when you are running short on capital and want to extend your runway.
One of the companies I consult for received a very attractive long term loan from SVB. To maintain confidentiality I cannot disclose the specific terms but they were more attractive than those mentioned above. This was for a pre revenue company that did not even have an alpha. The company had backing of a premier VC and the founder was a successful serial
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