Debt financing is raising capital by borrowing money that must be repaid with interest, used as an alternative or complement to equity financing. It includes everything from a personal credit card founders charge on day one to a $50M syndicated bank loan at a Series D company, with a wide spectrum of structures in between, each with different cost, covenant complexity, founder risk, and dilution tolerance.
The categories that matter for startups: founder-side debt (credit cards, personal lines of credit, home equity loans, used in the earliest pre-revenue phase, typically $5K to $100K, with personal liability and interest rates of 8 to 25 percent), SBA loans (Small Business Administration 7(a) and 504 programs, $500K to $5M t...