There are several reasons why it can be challenging to find the right venture debt and 2023 is going to be even harder.
One reason is that there are many different financing models available, and each one has its own set of advantages and disadvantages. For example, some venture lenders focus on providing ordinary loans, while others specialize in providing revenue based finance, ARR credit lines, user acquisitions finance, merchant cash advance and more. As a result, it can be challenging to determine which type of financing is best suited to a particular business. In 2018-2022 many different variations of financing were introduced to the market by Fintech lenders and traditional lenders and the navigation in this market has become even harder for startups.
Another reason why it can be difficult to find the right venture lender is that there are many different underwriting criteria that lenders use to evaluate loan applications. These criteria can vary widely from one lender to another, making it difficult for businesses to know in advance which lenders are likely to be interested in their loan request.
In addition, many venture lenders require a significant amount of data and financial modeling expertise in order to evaluate a loan application. This can be particularly challenging for businesses that don't have access to these resources, or that don't have experience with financial modeling and different types of financial reports.
If in the happy days of 2021 and H1 2022 lenders could stretch their credit box and be more flexible with approving loan applications, for various reasons (which rely on the lenders’ performance and market changes) in 2023 we see lenders becoming much stricter.
Overall, finding the right venture lender can be a difficult and time-consuming process which requires special financial expertise, but it is an important step for startups that are looking to secure the financing they need to grow and succeed with non-dilutive capital.
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