Venture debt is a source of alternative growth capital for UK companies, particularly in the early and high growth space.
Traditional bank loans are often unavailable to lend to what are seen as "risky" businesses. An equity financing by institutional VC investor often represents the most expensive form of capital in terms of the rights given away and the fact that it dilutes the founders’ economic interest in the company and, to some extent, shifts control over the business to the investors.
In contrast, venture debt can offer cheaper money without the dilutive effect of another equity financing round. Venture debt provides mid-term financial debt instruments targeted towards the specific needs of young high-growth technology companies which have already secured (previously or at least simultaneously) the backing of institutional VC investors. Venture debt is usually amortising (although it is sometimes structured with bullet repayments) and frequently features interest-only periods of anywhere from six months to eighteen months. A feature of some venture debt may also be an equity kicker for the lender in the form of a warrant.
It is important to understand your company's specific requirements and position as not all venture debt is created equal and it is not always preferable over an equity financing.