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Unfortunately these days banks don't extend large enough lines of credit for most growth businesses. There's a funding gap in between credit/debt and venture ca
by bkanber 9y ago
Unfortunately these days banks don't extend large enough lines of credit for most growth businesses. There's a funding gap in between credit/debt and venture capital.
SaaStr has a good writeup about it[1], and I've experienced the same thing at my company. Line of credit is good enough to bridge AR but not much more than that.
[1] https://www.saastr.com/once-a-saas-startup-hits-initial-traction-shouldnt-it-only-raise-debt-instead-of-equity/ https://www.saastr.com/once-a-saas-startup-hits-initial-trac...
- adventured 9y ago> Unfortunately these days banks don't extend large enough lines of credit for most growth businesses. That has been a universal problem for growth businesses in the US going back to the WW2 era (particularly cash thin product companies that have to plow their sales right back into growth). Phil Knight's Shoe Dog book has an almost unbelievable account of lines-of-credit hell (despite Nike's perpetual, extreme growth - basically doubling sales every year for the first ~15 years - they couldn't find any US banks willing to fund the growth; a Japanese import/export bank ended up saving them numerous times as several large US banks dumped their business).
- tsunamifury 9y agoBoth Wells Fargo and Chase Manhattan have extended $1 billion plus lines of no equity credit in the last 6 months to two different startups. This is changing.
- bkanber 9y agoWho are the startups? I'm betting that $1B is still in the 25-50% ARR range.
- deleted 9y ago[deleted]