For companies on the cusp of reaching breakeven, they often look for an extra boost of cash to help get them over the hump. While some companies instantly resort to raising an equity round, management and current investors may find less dilutive options more attractive at this stage of the company’s life. Venture debt is a great way to bridge to profitability, propelling the company forward during a critical period of growth.
This form of debt financing is minimally dilutive and can completely eliminate the need for a final round of equity.
In addition, companies that are nearly breakeven may have 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.
