Venture Decoded
Learn / Debt & Venture

Borrowing,
decoded.

Understand what the money funds, what repays it, and how the obligation changes a company’s cash flow. Explore startup credit, revenue-based financing, and borrowing across the venture ecosystem.

Explore the financing map Work through the numbers →

28 financing entries · Two interactive models · Three worked cases

Labels describe different layers. “Venture” describes a lending market. “Term loan” describes a structure. “Secured” describes collateral. “Bridge” describes a purpose. Several can apply to the same financing.

Debt can still affect ownership. Plain loans generally issue no equity. Warrants and conversion rights can change that. RBF, factoring, leases, and future-receivables purchases also need their actual legal structure explained.

01 / The financing map

Follow the obligation.

Open an entry for its uses, repayment source, terms, collateral, potential dilution, and a question to examine. Related financing is labeled separately from loans.

28 financing entries

Venture debt / growth debtStartup & growth loansBorrowing designed for high-growth companies, often alongside venture equity.
What it funds
Operating runway, expansion, acquisitions, or a defined business milestone.
What repays it
Interest and principal under the agreed schedule; cash generation, refinancing, or a later raise may support repayment.
Structure & terms
Term, draw conditions, interest-only period, amortization, fees, covenants, and any warrants.
Collateral & guarantees
May involve liens over company assets. Security, IP treatment, and guarantees depend on the documents.
Potential dilution
A plain loan issues no shares. Warrants or other equity-linked terms can create dilution.

A question to examineIf the next financing arrives late, what cash still meets the scheduled obligations?

Hypothetical exampleA hypothetical company borrows to complete a product milestone before its next equity round.

Read further: First Citizens Innovation Banking · Customers Bank

Link to this entry
Venture debtWarrantsFinancial covenant
Revenue-based financing (RBF)Startup & growth loansIn a revenue-share model, payments move with defined revenue until a contractual repayment amount is met.
What it funds
Growth activity supported by an existing revenue stream. Also described as revenue-share or royalty-based financing.
What repays it
An agreed revenue percentage, often subject to a repayment cap. Some products have additional payment or maturity provisions.
Structure & terms
Eligible revenue, share percentage, repayment cap, fees, reconciliation, prepayment, and any minimum payments.
Collateral & guarantees
Review liens and guarantees. The RBF label alone does not establish that either is absent.
Potential dilution
Usually no equity issuance in a plain revenue-share arrangement; check for warrants or equity-linked additions.

A question to examineHow much of gross profit remains after remittances, and how does faster repayment change annualized cost?

Hypothetical exampleAt a 5% share, $100,000 of eligible monthly revenue produces a $5,000 remittance before any contractual adjustments.

Read further: Lighter Capital

Link to this entry
Burn rateRunway
ARR / MRR financingStartup & growth loansCredit underwritten or sized using the quality of annual or monthly recurring revenue.
What it funds
Expansion for subscription and recurring-revenue businesses.
What repays it
May use ordinary interest and principal payments. Revenue-based underwriting does not necessarily mean revenue-share payments.
Structure & terms
Customer retention, revenue eligibility, borrowing limits, covenants, amortization, and draw conditions.
Collateral & guarantees
Collateral and guarantees vary by facility.
Potential dilution
No shares in a plain loan; negotiated warrants or conversion terms can change the outcome.

A question to examineDoes falling recurring revenue reduce borrowing availability, increase payments, or trigger a covenant?

Hypothetical exampleA hypothetical SaaS lender sizes a facility using recurring contracts but requires scheduled monthly loan payments.

Read further: Customers Bank

Link to this entry
Financial covenant
Traditional term loansStartup & growth loansA specified principal amount is borrowed for an agreed period.
What it funds
Expansion, equipment, acquisitions, refinancing, or other permitted business uses.
What repays it
Installments, interest-only payments followed by amortization, or principal due at maturity, depending on the agreement.
Structure & terms
Fixed or floating interest, fees, payment schedule, maturity, covenants, and prepayment treatment.
Collateral & guarantees
Can be secured or unsecured. A personal guarantee is a separate contractual obligation.
Potential dilution
An ordinary nonconvertible loan does not issue equity.

A question to examineWhat source of cash repays principal as well as interest?

Hypothetical exampleA hypothetical company repays a three-year expansion loan from operating cash receipts.

Read further: British Business Bank · Customers Bank

Link to this entry
Accrued interest
Revolving credit facilitiesStartup & growth loansDraw, repay, and reborrow within a facility’s availability rules.
What it funds
Working-capital timing and short-term liquidity needs.
What repays it
Interest on drawn amounts plus applicable fees; repayments restore availability only while the facility permits redrawing.
Structure & terms
Commitment, borrowing base, availability period, unused fees, renewal, and any clean-down requirement.
Collateral & guarantees
May be secured, unsecured, or asset-based; guarantees vary.
Potential dilution
A plain revolver does not issue equity.

A question to examineCould availability shrink just when customers pay more slowly?

Hypothetical exampleA hypothetical business draws $100,000 while awaiting customer receipts and repays after collection.

Read further: British Business Bank · Customers Bank

Link to this entry
Financial covenant
Convertible notes / loansStartup & growth loansDebt that can become shares under specified conversion provisions.
What it funds
Early fundraising or a bridge to another financing.
What repays it
Conversion, repayment, or another treatment under the maturity and event provisions.
Structure & terms
Interest, maturity, conversion triggers, valuation cap, discount, and change-of-control treatment.
Collateral & guarantees
Can be secured or unsecured; subordination and priority require review.
Potential dilution
Conversion issues equity and changes ownership.

A question to examineWhat happens if a qualifying equity round has not occurred by maturity?

Hypothetical exampleA hypothetical note converts in a priced round using its contractual cap or discount.

Read further: Cooley GO

Link to this entry
Convertible noteAccrued interestSeniority
Asset-based lending (ABL)Working capital & assetsA loan or credit line supported by eligible business assets.
What it funds
Working capital supported by receivables, inventory, or other assets.
What repays it
Collections or business cash flow; availability changes with the borrowing base.
Structure & terms
Advance rates, asset eligibility, reserves, reporting, audits, and concentration limits.
Collateral & guarantees
Security over the financed assets or a wider asset pool.
Potential dilution
A plain asset-based loan does not issue equity.

A question to examineWhich assets stop qualifying if customers delay payment or inventory becomes obsolete?

Hypothetical exampleIllustration: 80% of $200,000 of eligible invoices gives a $160,000 borrowing base before reserves or facility limits.

Read further: British Business Bank · British Business Bank

Link to this entry
Accounts receivable / invoice loansWorking capital & assetsBorrowing against invoices for sales already made.
What it funds
The gap between delivering goods or services and collecting payment.
What repays it
Customer collections support loan repayment.
Structure & terms
Invoice eligibility, advance rates, fees, collection arrangements, and disputed-invoice treatment.
Collateral & guarantees
Receivables serve as collateral; other security may be required.
Potential dilution
A plain invoice loan does not issue equity.

A question to examineDoes the business remain responsible if the customer disputes the invoice?

Hypothetical exampleA hypothetical supplier receives an advance against a customer invoice due in 60 days.

Read further: British Business Bank

Link to this entry
Inventory financingWorking capital & assetsCredit supported by eligible stock held for sale.
What it funds
Purchasing or holding inventory before customer cash arrives.
What repays it
Sales and subsequent collections support repayment.
Structure & terms
Inventory valuation, advance rate, turnover, storage, obsolescence, and reporting.
Collateral & guarantees
Financed inventory and potentially other company assets.
Potential dilution
A plain inventory facility does not issue equity.

A question to examineWhat happens to availability if inventory sells slowly or loses value?

Hypothetical exampleA hypothetical hardware company finances finished units awaiting sale.

Read further: British Business Bank · British Business Bank

Link to this entry
Purchase-order financingWorking capital & assetsFunds supplier costs associated with a qualifying customer order.
What it funds
Fulfilling an order when supplier payments come before customer receipts.
What repays it
Payment from the end customer funds settlement and fees.
Structure & terms
Order validity, supplier performance, customer credit, margins, fees, and payment routing.
Collateral & guarantees
Rights over the transaction and proceeds depend on its structure.
Potential dilution
Ordinarily no equity issuance.

A question to examineWhat if the customer cancels, rejects delivery, or pays late?

Hypothetical exampleA hypothetical manufacturer has a confirmed order but needs funding to pay the production supplier.

Read further: British Business Bank

Link to this entry
Equipment loansWorking capital & assetsBorrowing used to purchase machinery, equipment, or technology.
What it funds
Productive assets for manufacturing, research, or service delivery.
What repays it
Scheduled payments from business cash flow.
Structure & terms
Useful life, amortization, down payment, final payment, fees, and disposal restrictions.
Collateral & guarantees
The equipment commonly secures the loan; additional protections may apply.
Potential dilution
A plain equipment loan does not issue equity.

A question to examineDoes the repayment period fit the asset’s useful life and expected cash contribution?

Hypothetical exampleA hypothetical laboratory finances an instrument and pays over its operating life.

Read further: J.P. Morgan

Link to this entry
Business credit cardsWorking capital & assetsRevolving purchase credit; distinguish it from a charge card requiring full payment.
What it funds
Short-term operating purchases and expense timing.
What repays it
Required payments and interest under the card agreement; full payment can avoid some interest depending on the terms.
Structure & terms
Rate, grace period, fees, limits, payment terms, and liability.
Collateral & guarantees
Personal guarantees, cash security, or company-only liability depend on the product.
Potential dilution
Ordinarily no equity issuance.

A question to examineIs this a temporary timing need or an operating deficit being carried forward?

Hypothetical exampleA hypothetical company uses a card for software expenses and pays the statement from customer receipts.

Read further: British Business Bank

Link to this entry
Government-supported business loansSpecialized financingLoans made or supported through a specific public program.
What it funds
Permitted business uses under programs such as U.S. SBA 7(a), 504, or microloans.
What repays it
Business cash flow under program and lender terms.
Structure & terms
Eligibility, permitted uses, underwriting, guarantee fees, maturity, and reporting.
Collateral & guarantees
Requirements vary by program. A government guarantee to a lender does not cancel borrower repayment duties.
Potential dilution
A plain program loan does not issue equity.

A question to examineDoes this company and intended use meet the actual program requirements?

Hypothetical exampleA hypothetical eligible business uses a program loan to finance equipment or expansion.

Read further: U.S. Small Business Administration

Link to this entry
Subordinated / mezzanine debtSpecialized financingDebt whose repayment or security priority is behind specified senior debt.
What it funds
Growth, acquisitions, and financing gaps beyond senior borrowing capacity.
What repays it
May combine cash interest, deferred interest, a maturity payment, and performance-linked returns.
Structure & terms
Subordination agreement, payment restrictions, maturity, PIK interest, and equity-linked features.
Collateral & guarantees
May be unsecured or have junior security; the intercreditor arrangements matter.
Potential dilution
Warrants or conversion rights can create dilution; junior ranking alone does not.

A question to examineWhen can junior payments be blocked by the senior facility?

Hypothetical exampleA hypothetical acquisition combines a senior loan, junior financing, and equity.

Read further: BDC

Link to this entry
SeniorityWarrants
Unitranche facilitiesSpecialized financingOne borrower-facing facility combines senior and junior debt economics.
What it funds
Acquisitions, recapitalizations, and larger growth financings.
What repays it
A negotiated combined payment schedule and rate.
Structure & terms
Facility terms, lender voting, enforcement, and any first-out / last-out (FOLO) arrangements among lenders.
Collateral & guarantees
Often secured. One facility can have multiple participating lenders.
Potential dilution
A plain facility does not issue equity; review any equity-linked additions.

A question to examineWho can approve an amendment or control enforcement if the business misses a covenant?

Hypothetical exampleA hypothetical growth company signs one facility rather than separate senior and junior borrower agreements.

Read further: BDC Capital · Customers Bank

Link to this entry
IP-backed loansSpecialized financingFinancing supported by the value of intellectual property.
What it funds
Growth at companies with valuable intangible assets.
What repays it
Operating cash flow or another agreed repayment source; the IP is credit support, not cash payment itself.
Structure & terms
IP ownership, valuation, enforceability, licensing, and restrictions on sale or further security.
Collateral & guarantees
IP-related security and other protections depend on the deal.
Potential dilution
A plain loan does not issue equity.

A question to examineCould the company still operate if enforcement affected its core IP?

Hypothetical exampleA hypothetical technology company uses its IP portfolio to support a growth financing.

Read further: BDC Capital

Link to this entry
Tax-credit bridge loansSpecialized financingAdvances against expected eligible tax-credit proceeds.
What it funds
Cash timing while awaiting a qualifying credit, including Canadian innovation-credit programs.
What repays it
Expected credit receipts, subject to the financing agreement.
Structure & terms
Claim eligibility, expected receipt date, amount reductions, fees, and repayment recourse.
Collateral & guarantees
Security or assignment of proceeds and additional recourse vary.
Potential dilution
A plain bridge loan does not issue equity.

A question to examineWho funds a shortfall if the credit is reduced, rejected, or delayed?

Hypothetical exampleA hypothetical Canadian company borrows against an expected refundable SR&ED claim.

Read further: CTAP

Link to this entry
Project financeSpecialized financingFinancing organized around a defined project and its projected cash flows.
What it funds
Facilities and commercial deployment in sectors such as energy and infrastructure.
What repays it
Project cash flows, supported by contracts and the financing structure.
Structure & terms
Construction milestones, completion support, operating contracts, reserves, and debt-service requirements.
Collateral & guarantees
Project assets and contractual rights; recourse to sponsors depends on the arrangement.
Potential dilution
A plain project loan does not issue equity. The project may separately have equity investors.

A question to examineWho bears construction delays or a shortfall in contracted project receipts?

Hypothetical exampleA hypothetical company finances a separately structured energy deployment project.

Read further: U.S. Department of Energy

Link to this entry
Warehouse facilitiesSpecialized financingCredit against a pool of originated or acquired loans or receivables.
What it funds
The financial assets of a lending platform or other originator.
What repays it
Collections, asset sales, refinancing, or securitization under the facility structure.
Structure & terms
Asset eligibility, advance rates, concentrations, performance triggers, reserves, and servicing.
Collateral & guarantees
Financed pools and related rights commonly support the facility.
Potential dilution
A plain facility does not issue equity; other transaction features may.

A question to examineIs the facility financing customer assets, company operating losses, or both?

Hypothetical exampleA hypothetical fintech funds customer receivables through a dedicated warehouse facility.

Read further: Parafin / PR Newswire

Link to this entry
Corporate notes, bonds & debenturesSpecialized financingDebt securities sold to investors; more relevant as companies mature.
What it funds
General corporate needs, refinancing, acquisitions, and expansion.
What repays it
Contractual interest and principal; structures can use fixed, floating, or zero-coupon economics.
Structure & terms
Maturity, coupon, covenants, call rights, priority, security, and conversion provisions.
Collateral & guarantees
Can be secured or unsecured. In U.S. usage, a debenture is generally unsecured.
Potential dilution
Ordinary nonconvertible debt does not issue shares; convertible bonds can.

A question to examineIs the instrument convertible, and what amount is due at maturity?

Hypothetical exampleA hypothetical mature company issues nonconvertible notes; another uses convertible bonds.

Read further: SEC / Investor.gov · Cooley GO

Link to this entry
Seniority
Invoice factoringRelated financingGenerally a sale of receivables rather than a loan against them.
What it funds
Accelerating cash from completed sales.
What repays it
Customer collections go to the factor under the purchase and servicing arrangement.
Structure & terms
Purchase discount, reserve, recourse, disputes, collection responsibility, and customer notice.
Collateral & guarantees
The factor buys receivables; recourse and other protections remain important.
Potential dilution
Ordinarily no equity issuance.

A question to examineWhich nonpayment risks remain with the company after the sale?

Hypothetical exampleA hypothetical supplier sells an invoice at a discount to receive cash sooner.

Read further: BDC

Link to this entry
Merchant cash advances / receivables purchasesRelated financingUpfront funds exchanged for future receipts; some arrangements are structured as sales, not loans.
What it funds
Cash needs at businesses with existing sales.
What repays it
Remittances from sales, sometimes using frequent debits and contractual reconciliation provisions.
Structure & terms
Purchased amount, fees, debit frequency, true-ups, recourse, and default triggers.
Collateral & guarantees
Review liens, guarantees, and collection rights; marketing descriptions do not replace the agreement.
Potential dilution
Ordinarily no equity issuance.

A question to examineHow do remittances actually adjust when sales decline?

Hypothetical exampleA hypothetical business remits part of sales under a future-receivables purchase agreement.

Read further: California DFPI

Link to this entry
Equipment leasingRelated financingUse equipment through rental payments instead of buying it outright with a loan.
What it funds
Access to machinery, equipment, or technology.
What repays it
Lease payments and any contractual end-of-term purchase or residual obligation.
Structure & terms
Ownership, maintenance, cancellation, renewal, purchase options, and residual value.
Collateral & guarantees
The lessor generally owns the equipment; guarantees or deposits may also apply.
Potential dilution
Ordinarily no equity issuance.

A question to examineWhat does the company own, owe, or return at the end of the term?

Hypothetical exampleA hypothetical business leases an instrument and decides later whether to buy or return it.

Read further: British Business Bank · J.P. Morgan

Link to this entry
Trade credit / supplier termsRelated financingA supplier allows payment after goods or services are delivered.
What it funds
Day-to-day purchasing and working-capital timing.
What repays it
Payables are settled on the supplier’s agreed due dates.
Structure & terms
Payment window, early-payment discount, late charges, credit limit, and supply restrictions.
Collateral & guarantees
Security and guarantees depend on supplier arrangements.
Potential dilution
Ordinarily no equity issuance.

A question to examineWhat is the cost of foregoing an early-payment discount, and could supply stop if payment slips?

Hypothetical exampleA hypothetical supplier invoices on net-30 terms rather than requiring payment on delivery.

Read further: British Business Bank

Link to this entry
Subscription / capital-call facilitiesFunds & managersFund borrowing supported by eligible uncalled investor commitments and capital-call rights.
What it funds
Timing investments and aggregating capital calls.
What repays it
Capital called from limited partners under the facility structure.
Structure & terms
Eligible commitments, concentration, borrowing base, duration, costs, and LP disclosure.
Collateral & guarantees
Capital-call rights and related collateral; fund documents constrain their use.
Potential dilution
Ordinarily no startup equity is issued merely because the fund borrows.

A question to examineHow does borrowing affect LP cash timing, costs, and reported performance?

Hypothetical exampleA hypothetical VC fund uses a line to close an investment before its next capital call.

Read further: ILPA · HSBC Innovation Banking

Link to this entry
NAV-based facilitiesFunds & managersFund borrowing supported by portfolio value and associated cash flows.
What it funds
Portfolio support and other permitted liquidity needs at fund level.
What repays it
Portfolio realizations, distributions, or other agreed fund-level sources.
Structure & terms
Valuation, loan-to-value tests, concentration, cash sweeps, permitted uses, and disclosures.
Collateral & guarantees
Portfolio-related collateral and structural arrangements vary.
Potential dilution
Ordinarily no startup shares are issued by the facility itself.

A question to examineWhich investments or cash flows become exposed if portfolio values decline?

Hypothetical exampleA hypothetical mature fund borrows against its portfolio to support permitted follow-on activity.

Read further: ILPA

Link to this entry
Management-company creditFunds & managersBorrowing by the investment manager rather than a portfolio company.
What it funds
Manager operations and working capital.
What repays it
Manager revenues and other agreed repayment sources.
Structure & terms
Fee visibility, fund duration, expenses, permitted borrowing, and recourse.
Collateral & guarantees
Manager assets, fee rights, or guarantees depend on the agreement.
Potential dilution
A plain management-company loan does not itself issue portfolio-company equity.

A question to examineWhich legal entity owes the money, and what happens if management fees decline?

Hypothetical exampleA hypothetical manager uses a working-capital line for operating-expense timing.

Read further: HSBC Innovation Banking

Link to this entry
GP commitment loansFunds & managersLoans that help general partners fund their own fund commitments.
What it funds
Some or all of a partner’s required investment in a fund.
What repays it
The partner’s agreed repayment sources under the loan.
Structure & terms
Borrower identity, maturity, repayment source, distributions, and recourse.
Collateral & guarantees
Personal or entity recourse and collateral vary.
Potential dilution
A plain commitment loan does not issue portfolio-company shares.

A question to examineCan the borrower repay if fund distributions arrive later than expected?

Hypothetical exampleA hypothetical partner borrows part of a required commitment while remaining responsible for the loan.

Read further: HSBC Innovation Banking

Link to this entry
Where does a SAFE belong?

The standard YC SAFE is a future-equity instrument, with no interest or maturity date. A convertible note is debt. Read both in Deal Terms Explained. YC reference ↗

02 / Compare the mechanics

The payment pattern matters.

These are simplified structures, not standard offers. A facility’s negotiated terms determine its cash commitments and rights.

Selected structures, using U.S. terminology where relevant.
StructureWhat supports financing?Payment mechanismPotential dilution
Venture debtCompany progress, liquidity, investor support, and repayment prospects.Contractual interest and principal; draw and repayment conditions vary.Possible through warrants or equity-linked terms.
Revenue-share RBFAn existing eligible revenue stream.A share of revenue toward a contractual repayment amount, with any additional provisions.Usually none in a plain arrangement; check additions.
ARR / MRR loanRecurring-revenue quality and contractual eligibility.May use conventional loan payments rather than a share of revenue.Depends on any warrants or conversion rights.
Asset-based creditEligible assets and borrowing-base rules.Collections and business cash flow; availability can change.None from a plain loan.
Convertible noteCompany prospects and the agreed financing terms.Conversion or the contractual treatment at maturity and other events.Shares issued on conversion.
Nonconvertible bondsIssuer credit and any security.Interest and principal according to the security’s terms.None from plain nonconvertible debt.

Concept references: Customers Bank · Lighter Capital · Cooley GO · SEC

Purpose & provider

Bridge, acquisition, and refinancing describe uses. Founder or shareholder loans identify the lender. Private credit and direct lending describe a market or provider.

Security & priority

Secured, unsecured, first-lien, second-lien, senior, and subordinated describe different protections and ranking. A guarantee is a separate promise to pay.

Payment & access

Amortizing, interest-only, bullet, balloon, and PIK describe payments. A commitment is not always immediately drawable cash; conditions can limit access.

Decode the payment terms
Amortization
Principal is paid down over time. Equal principal installments differ from equal total-payment installments.
Interest-only period
Cash interest is paid while principal remains due. Later principal payments can increase cash outflows.
Bullet / balloon
A bullet leaves principal to maturity; a balloon leaves a larger final payment after earlier payments.
PIK interest
Payment-in-kind interest is added to the obligation instead of paid in cash at that time.
Warrant
A right to purchase equity under defined terms; potential dilution is part of the financing economics.
Covenant / draw condition
A covenant is an obligation under the agreement. A draw condition must be met to access a borrowing tranche.
WarrantsFinancial covenantSeniority
03 / Work through the numbers

Change an assumption.
Follow the cash.

These models show two specific structures. Amounts are USD. Inputs stay in this browser tab; no lender or eligibility recommendation is produced.

Model A / Revenue-share financing

Revenue-based financing

Explore how revenue, remittances, and repayment timing connect. This model uses a percentage of monthly revenue, a repayment cap, and an upfront fee.

Enable JavaScript to calculate this model.

Revenue is not profit.

The remittance takes part of the contractual revenue base. Operating costs, gross margin, taxes, and collection timing still affect cash available to the business.

Formulas & assumptionsNet cash today = advance × (1 − upfront fee %)
Remittance cap = advance × repayment multiple
Revenue in month m = first-month revenue × (1 + monthly change)^(m − 1)
Monthly remittance = smaller of (revenue × share) and cap still unpaid

The first remittance occurs at the end of month one. No minimum payment, maturity acceleration, late charges, taxes, equity features, or prepayment discount is modeled. After the cap is paid, modeled payments stop. The financing charge equals the cap less net cash received and assumes the cap is ultimately paid.

Annualized cash cost solves the monthly cash-flow IRR and compounds it for 12 months. It is shown only if the full repayment cap is reached within the horizon. It is an educational effective rate, not a statutory APR disclosure or a forecast.

Structure reference: Lighter Capital — RBF mechanics. Calculation design and assumptions are Venture Decoded’s illustrations.

Model B / An amortizing term loan

Loan payments & cash runway

Compare the same operating plan with and without a new loan. See the initial cash increase and the scheduled payments that follow.

Enable JavaScript to calculate this model.

Formulas & assumptionsNet loan proceeds = principal × (1 − upfront fee %)
Monthly interest = opening principal × annual rate ÷ 12
Principal payment after interest-only = principal ÷ (term − interest-only months)
Closing cash = opening cash + assumed financing − operating burn − loan payment

The full loan is drawn today. This model uses equal principal installments after the interest-only period; total payments decline as principal falls. It is not a level-payment loan or a balloon structure. The fixed rate applies throughout, fees are deducted today, and the last scheduled principal payment clears rounding residue.

Both paths have the same constant operating burn and the same optional future financing. Future financing arrives at the start of its specified month; other payments occur during that month. Cash exhaustion means the balance is at or below zero at the start or a modeled month end; intra-month timing is not evaluated. Negative balances represent an unfunded cash requirement. The schedule continues to show obligations, without modeling default, restructuring, or a lender’s enforcement rights.

A later assumed raise does not erase an earlier cash shortfall. No warrants, taxes, restricted cash, additional fees, or other debt are included. An undrawn loan commitment is not added to cash.

Venture debtRunwaySimple cash runway
04 / Test your first impression

Three cases. Different questions.

All companies and amounts below are fictional. Consider the question before opening the explanation, then identify the evidence that could change your view.

01
Working-capital timing

An invoice is an asset. When is it cash?

A hardware company has delivered a $300,000 order, payable in 90 days. It must pay $180,000 of supplier bills in 30 days. A proposed facility advances 75% against eligible invoices.

Before openingDoes the advance cover the supplier payment, and what still needs checking?

Follow the cash and evidence

The gross advance is $225,000, leaving $45,000 after the supplier payment, before fees and other needs. That arithmetic assumes the entire invoice is eligible. Verify customer acceptance, disputes, payment history, existing liens, other operating needs, and what happens if collection is late.

The learning: order value, accounting revenue, collateral eligibility, and spendable cash are different amounts.

Read about receivables loans →
02
RBF & operating margin

A flexible payment still uses cash.

A subscription company receives $100,000 of monthly revenue. An RBF agreement takes 5%, while gross margin is 30%. Assume revenue is collected in the same month and direct costs are paid then.

Before openingHow much gross profit remains before overhead, and what does the repayment multiple tell you?

Separate revenue, margin, and cost

The payment is $5,000. Gross profit before financing is $30,000, leaving $25,000 before overhead and other obligations. The remittance consumes 16.7% of that gross profit. If a hypothetical $500,000 advance has a 1.4× cap, capped remittances total $700,000, excluding additional fees.

The learning: 5% of revenue is a different burden from 5% of profit. The repayment cap alone does not state an annualized financing rate.

Change the RBF assumptions →
03
An equity raise & old debt

How much new money reaches the operating plan?

A company announces a $3 million equity round. Closing requires repayment of $1 million of existing principal and $100,000 of accrued interest and fees. The operating plan needs $150,000 per month of net cash burn.

Before openingHow many months does the remaining new cash fund?

Trace the uses of proceeds

The new-money remainder is $1.9 million: $3 million less $1.1 million of debt-related payments. On its own, that funds about 12.7 months at $150,000 per month, before other closing costs, reserves, or changes in cash flows. This is the runway contribution of the remaining new money; total company runway also depends on existing cash and all other obligations.

The learning: examine financing proceeds and their required uses together. If the raise is delayed, the old debt’s due dates still need a plan.

Explore loan payments and financing timing →
05 / Bring the documents together

A borrowing discussion, in six questions.

Use the same questions as a founder planning cash or an investor examining an existing obligation.

  1. Who owes what?Identify the borrower, guarantors, amount drawn, and undrawn commitment.
  2. What is the money for?Connect permitted uses with the company’s operating plan and milestones.
  3. What repays it?Separate customer collections, operating cash, conversion, refinancing, and a future equity raise.
  4. When does cash leave?Map interest, fees, amortization, maturity, minimum remittances, and potential acceleration.
  5. What rights come with it?Read collateral, guarantees, covenants, draw conditions, warrants, and priority together.
  6. What changes under a delay?Test later receipts, slower revenue, a delayed financing, and less borrowing availability.
Keep the ideas connected

From financing structure
to the wider investment.

Return to funding fit, read the equity terms, or use the dictionary to unpack an unfamiliar concept.

Explore funding options ↗Read Deal Terms Explained ↗Explore Venture Math ↗Open Venture Dictionary ↗

Sources & further reading

  1. First Citizens Innovation BankingUnderstanding venture debt financing ↗
  2. Customers BankVenture Debt 101: structures and facilities ↗
  3. Lighter CapitalRevenue-based financing: mechanics and repayment ↗
  4. Cooley GOPrimer on convertible debt ↗
  5. British Business BankWorking-capital finance options ↗
  6. British Business BankFinance Finder: asset and invoice finance ↗
  7. British Business BankPurchase-order financing guide ↗
  8. J.P. MorganEquipment financing and loans ↗
  9. U.S. Small Business Administration7(a), 504, and microloan programs ↗
  10. BDCSubordinate financing and junior debt ↗
  11. BDC CapitalGrowth financing and unitranche structures ↗
  12. BDC CapitalIntellectual property-backed financing ↗
  13. CTAPCanadian tax-credit bridge financing ↗
  14. U.S. Department of EnergyProject finance and credit risk ↗
  15. Parafin / PR NewswireA fintech warehouse financing example ↗
  16. SEC / Investor.govWhat are corporate bonds? ↗
  17. BDCFactoring: sales of receivables ↗
  18. California DFPIMerchant cash advances and future receivables ↗
  19. ILPASubscription lines of credit ↗
  20. ILPANAV-based facilities guidance ↗
  21. HSBC Innovation BankingFund, management-company, and GP financing ↗
  22. Y CombinatorThe SAFE: a future-equity instrument ↗

Sources checked October 17, 2026. Lender pages illustrate particular structures and may describe their own products. Entry questions, cases, and models are Venture Decoded’s educational synthesis. Terminology, legal form, and negotiated terms vary; U.S. debenture and SBA references and Canadian tax-credit examples are labeled accordingly. Source organizations do not endorse this page.