Debt Options for Startups

Debt Options for Startups

September 28, 2021 by investor

As your company grows and the equity becomes worth more, there comes a time to switch over to debt funding.

There are several forms of debt to consider. Each one is used for a different application. 

The primary options are as follows:

1. Traditional bank loan – requires a personal guarantee and is most often used to launch a company.
2. Line of credit – once you have revenue, this can be used to smooth out the uneven bumps in your cash flow.
3. Equipment financing – if you need equipment for your business this is a good way to finance it as it reduces your fundraise requirements.
4. Revenue-based funding – once you have a steady flow of revenue, you can use revenue-based funding to accelerate the growth as you pay back out of the revenue stream.
5. Factoring/Accounts receivable funding – once you have a steady book of business, you can borrow against the accounts receivable line.
6. Venture debt – once you have substantial revenue, you can raise debt funding rather than equity funding, as it will be cheaper in the long run. 

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.


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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.

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