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de Rassenfosse, G. & Fischer, T., 2016. "Venture Debt Financing: Determinants of the Lending Decision". Strategic Entrepreneurship Journal 10(3), 235-256.
Venture debt lending is a form of start-up financing that lies at the intersection of venture capital and traditional debt. We analyze the lending decision criteria of 55 senior U.S. venture debt lenders (VDLs) using a discrete choice experiment in order to understand how VDLs overcome barriers that traditionally hamper start-ups' access to debt. We find, first, that the provision of patents as collateral is as important as the provision of tangible assets to lenders. Second, VDLs showed a marked preference for start-ups that offered warrants. Third, venture capitalists' backing substitutes for a start-up's positive cash flows.
Keywords: venture debt, high-growth start-up, patent signalling, collateral, start-up financing
JEL classification: G21, G24; O34; L26
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