Venture debt
A loan for fast-growing companies that are already backed by venture capital, used to stretch the money from an equity round further without selling more shares.
- Debenture (charge over company assets)
How it works
Venture debt is lent to early-stage, high-growth companies that already have venture capital investors. It usually sits alongside an equity round, not instead of one.
- Lenders look mainly at your investors, your recent equity rounds and how fast you are spending cash, not at profits or physical assets.
- The loan size usually reflects the size of the equity round and your cash burn.
- A typical use is extending your "runway". For example, adding a £2–3 million loan to an equity round can give three to six more months to reach the next milestone.
- Loans can sometimes reach up to £10 million.
- Lenders do not normally ask for a board seat.
Upsides and downsides
Upsides
- Extends your runway without selling more shares
- Founders and staff keep their current shareholdings
- No extra board seat needed
- Available to companies without assets, profit or even revenue
Downsides
- Interest rates are higher than traditional bank loans
- Only for venture-backed companies
- Must be repaid even if the next round is delayed
Risks
- Repayments can become a serious problem if growth stalls or the next round fails
- Lenders' rights over company assets if you default
What it costs
- How it is priced
- Interest, often higher than traditional business loans, plus fees
- Costs that are easy to miss
- Interest rates higher than bank loans
- Fees and other terms set by each lender. Check them before you sign
Linked to the size of your equity round and cash burn. Sometimes up to £10 million.
Does it fit?
Could fit when
- You are venture-backed and have just raised, or are raising, an equity round
- You want extra runway to reach a milestone and a higher valuation
Unlikely to fit when
- You have no venture capital investors
- Your plan depends on hitting milestones you are unsure about
Who can use it
- Business types: Private limited company, Public limited company
- Open to businesses with no sales yet
- Usually only for companies already backed by venture capital
- Lenders look at your investors' track record and their capital set aside for future rounds
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all asset-based and specialist lending
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- Investor backing
- Cash burn and runway model
- Milestone plan
Regulation and protections
Commercial finance is not generally subject to statutory conduct regulation in the UK. Your protection comes from the loan agreement, so take legal advice before you sign.
Types of provider: Specialist venture debt funds; Banks with technology and growth lending teams.
Also consider
Sources
- British Business Bank: What is venture debt? · checked 7 October 2026
- UK Finance: The Standards Framework for Invoice Finance and Asset-Based Lending (January 2025) · checked 7 October 2026