Generally, venture financing or venture lending is a term that broadly covers loans to early stage or VC-backed companies. In return for the loan or financing, the venture financiers or lenders receive principal and interest payments. In certain cases, venture financiers receive warrants and the right to invest in a future round.
Financing to early stage companies can broadly take the following forms, i.e. project finance, venture leasing and venture debt.
The first refers to the provision of financing to enable early stage companies to procure the necessary project inputs such as hardware/equipment, software/licences, services and pertinent operating expenditures, and payments are secured primarily from the project itself.
The second resembles leasing in the traditional sense, where specific assets are leased and the title of these assets belongs to the lessor (or lessee where operating lease). The third, better known as venture debt, or as a venture loan, is where a loan is provided and backed by a senior charge or debenture on substantially all assets of the company, including intellectual property (IP).