# Venture debt

> A loan after a round, often with warrants: runway with less dilution, and a repayment schedule that does not wait.

Source: https://lopifi.com/learn/ways-to-raise-startup-capital/venture-debt
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What is venture debt and when should a startup use it?** A loan after a round, often with warrants: runway with less dilution, and a repayment schedule that does not wait.

[Venture debt](https://lopifi.com/md/glossary/venture-debt) is a loan to a company that has raised venture equity, usually soon after a round. It extends [Runway](https://lopifi.com/md/glossary/runway) with less dilution than selling more stock — the lender typically takes a [Warrant](https://lopifi.com/md/glossary/warrant) for a small amount of equity — but it is a loan: interest and principal are owed on schedule whether or not the next round comes.

— [Wikipedia, “Venture debt”](https://en.wikipedia.org/wiki/Venture_debt), Venture debt and warrant coverage — background

On the books it is ordinary debt: cash and a loan payable when it lands, then each payment split between interest expense and principal. The [loan repayment entry](https://lopifi.com/md/journal-entries/loan-repayment) and the loan calculator show the schedule.

*[Figure: burn runway]*

Illustrative: debt adds cash without changing burn, so it moves the runway line — and the repayments start pulling it back.

**Venture debt**
- Pro: Far less dilution than equity for the same cash
- Pro: Can be drawn as needed
- Pro: No new valuation
- Con: Must be repaid; covenants can restrict the company
- Con: Warrants still dilute a little
- Con: Dangerous when the next round is uncertain
- Best for: A company that just raised equity and wants more months before the next round

## Where this page's rules come from

- [Wikipedia, “Venture debt”](https://en.wikipedia.org/wiki/Venture_debt) — Venture debt and warrant coverage — background (reference)

## Read further

- https://lopifi.com/md/journal-entries/loan-repayment
- https://lopifi.com/md/calculators/debt-to-equity
- https://lopifi.com/md/tools/loan

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Part of:** [Ways to raise: SAFEs, notes, priced rounds, debt and grants](https://lopifi.com/md/learn/ways-to-raise-startup-capital) — 4 min
- **Terms taught:** [Venture debt](https://lopifi.com/md/glossary/venture-debt), [Warrant](https://lopifi.com/md/glossary/warrant)
- **Previous:** [The priced round](https://lopifi.com/md/learn/ways-to-raise-startup-capital/priced-round)
- **Next:** [Revenue-based financing](https://lopifi.com/md/learn/ways-to-raise-startup-capital/revenue-based-financing)
- **The course:** https://lopifi.com/md/learn