I don’t want to give up any equity. Would a VC/PE firm or angel investor be interested in providing a high interest loan?

Angel investors and Private equity firms, including early stage Venture Capital firms and late stage Buyout firms, prefer to invest in equity because theirs is risk capital. They do not typically seek to secure their investments with collateral, like a bank would do. However, they usually invest in preferred shares, which often have earn a fixed interest rate. Preferred shares, therefore, have characteristics of deft (they earn interest), but they are essentially equity shares since they are unsecured, have voting rights and can participate in the profits of the company.

A private equity firm can also introduce you to specialized banks that may be willing to provide you with “venture debt”, which is simply a loan provided to a VC-backed company. This loan might be secured by the receivables or equipment. Unlike typical bank loans, venture debt is an option for startups and growth companies that do not have profits or collateral in the form of real estate non-specialized equipment.

Be Sociable, Share!

Leave a Reply