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Venture Debt: Managing Cash in a Challenging Market
We source and structure venture debt financing for growth-stage companies, often in between major equity events such as a raise or bridging to an exit transaction. Our clients often have:

• Slower or flat revenue trends
• Older or inactive equity support
• Shorter runway, OR
• A desire to defer an equity co-investment altogether

Our specialty is in putting together creative capital solutions for companies with unique stories to their credit profile.


Who is 5th Line?

Months on Average Since Our Clients Last Raised Equity

14

100+

Industries & Sectors

Served

27
100

Companies Evaluated

Each Quarter

Million Dollars Funded
since 2021
• Equity markets have turned downward and started locking up
• Banks are getting more narrow in their lending criteria
• Liquidity is a growing concern in the market
• Debt markets are still heavily liquid and active
• Lenders are still aggressive on deals they like
• Companies who aren’t raising equity soon still have debt options
Venture Debt Market Snapshot
Our Current Engagements are Showing Us:

Current Market Conditions:

• Funding a company that needs cash without using their own capital


• Refinancing an existing, less friendly lender


• Funding a company to an exit or their next round

How VC’s Use Debt in Their Portfolio
Types of Venture Debt Facilities

Term Loans

Debt facilities typically structured as a committed total amount with either the entire balance funded at close or structured in tranches based on milestones or company’s request of draws. This is the most common form of venture debt funded by debt funds, especially for the larger facilities ($10MM+).

Lines of Credit

Structured for flexible draws by the borrower, this is a committed facility designed to have little to no requirement for the company to utilize the capital but have as an insurance policy and ready access to funds when needed.

CapEx Financing

Specialty financing being used more frequently by companies to finance hard costs such as equipment or related expenses associated with driving revenue. This can include equipment, components and related soft costs for deployment. Used frequently by manufacturing, robotics and IOT companies.

General Venture Debt Structures
• Cost: 10-14% Annually
• Term: 2- Years with renewal options
• Lien & Collateral: Equipment-Only
• Warrant Coverage: None
• Covenants: None

• Rate: 9-13%
• IO Period: 6-24 Month
• Full Maturity: 36-48 Months
• Warrant Coverage: Less than 1% dilution
• Covenants: Minimal, if any

Venture Debt Term Loans or Lines of Credit
CapEx Lines of Credit

There’s a commonality in the venture debt market, where the majority of options lean toward companies with:


• $4MM+ in ARR ($7MM+ Revenue if non-SaaS)


• $2MM+ in Capital Need


• A history of business performance OR a story supporting future growth

Who's Best Suited for Venture Debt?
Why Our Clients are Looking for Debt
• Some are looking for debt as an insurance policy, to ensure their balance sheet is strong through 2023 without their investors needing to fund them while still being able to capitalize on growth opportunities


• Some are in need of capital to get through their growth phase while avoiding a flat or down equity round if they go to the equity markets right now…that’s if equity is an option at all for them


• Companies that are in between equity rounds

• Companies with slower growth or flat revenue trends

• Companies with unique capital needs or business models

• Companies looking to refinance existing facilities with greater capital availability and friendlier terms
We Specialize in Venture Debt Situations Outside the ‘Norm’
Contact Information
If you, your portfolio, or your clients have any questions on the debt markets, please don’t hesitate to reach out.

265 Franklin Street
Suite 1702
Boston, MA 02110
Contact Information
James Turner
Founder & CEO, 5th Line Capital
jturner@5thline.co