Glossary
A loan to a venture-backed company, often with warrants.
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Short answer: Venture debt is a loan to a venture-backed company, lent mainly on the strength of its investors and runway, with interest, fees and often warrants. A start-up that just raised $5 million might add a $1.5 million facility to extend runway without a new equity round. It is not the same as revenue-based financing.
Key facts
Related: Business Funding Glossary: 70 Terms Explained · Factor Rate Explained: How MCA Pricing Works · What Business Funding Costs in Canada, Compared · Business Funding Comparisons for Canadian Owners · Business Funding Calculators in Canadian Dollars
A loan to a venture-backed company, often with warrants.
Venture debt is lent mainly on the strength of a company's investors and runway. It carries interest and fees and often warrants.
It extends runway without a new equity round.
A start-up that just raised $5 million may add a $1.5 million venture debt facility to extend runway.
Available to venture-backed Canadian companies through specialized lenders and some banks.
Funders reading a venture-backed file will look at both the debt and the equity behind it.
Venture debt is not the same as revenue-based financing, which is lent on revenue.
Glossary terms are most useful next to the decisions they affect. If you are comparing offers, read the pages on factor rates, payback amounts and the repayment cap together. If you are preparing an application, the documents checklist and requirements pages explain what is read. And if a term in an agreement is unclear, ask the funder to explain it in writing before you sign; a good funder will.
Venture debt is usually sized as a fraction of the most recent equity raise and repaid over a few years, sometimes after an interest-only period. Because lenders rely on the investors' support, a company whose investors stop funding it may find the debt becomes due at a difficult time.
Venture debt shows up in a term sheet with an interest rate, fees, a draw period, an amortization schedule and a warrant coverage figure. In the company's bank statements it appears as a lump-sum deposit followed by monthly interest and, later, principal payments. On the balance sheet it is a liability, while the warrants may be recorded separately in equity.
Most funding terms come back to two questions: how much will I repay in total, and how will each payment affect my cash in a normal month and a slow one. When you meet an unfamiliar term in an offer or agreement, translate it into those two answers before deciding whether it matters. If a funder cannot explain a term in plain language and with your own numbers, treat that as useful information about the offer.
These terms often appear alongside venture debt in offers, agreements and conversations with funders:
Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.
Rarely. It depends on institutional backing.
See the related guides and the comparison pages, or apply and ask.
No. It is educational information, and agreements vary.
Educational information only. It is not legal, tax or accounting advice.
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