Venture Debt Uses – Bridge to Profitability
For companies close to reaching break-even, investors may want to avoid putting in more equity. Management will most likely find less dilutive options more attractive at this stage of a company’s life. Using venture debt to bring the company to break-even means the company can be self-sustaining.
In cases where the company is nearly break-even, there may be more repayment options available than at earlier stages – particularly longer amortization schedules or bullet loans. For example, a longer amortization term can make more sense for a company close to profitability as the company has more time to repay the loan when it is at a point where they are generating sufficient cash flows to service the debt.