Many founders misconstrue venture debt as 'free money,' but it's more nuanced than standard equity fundraising that founders are used to.
- How will you utilize and repay the capital, considering draw and repayment periods?
- How much funding is needed, and how will repayment and interest cost impact cash flow and overall company expenses?
- Do founders have 100% visibility into loan repayment through cash flows or future financing?
- Are cash flows from revenue and other assets adequate to cover the loan throughout its repayment period?
- What is the debt's purpose and its impact on milestones or fundraising efforts, including potential barriers to future financing?
- Will the debt hinder raising the next round of financing, given a significant increase in valuation or funding requirements?
- Will the debt hinder entry to the next round if a significant portion must be immediately allocated?
