Growth Lending Terms - 2025 holiday edition

AI headlines are endless. The venture debt landscape, meanwhile, has quietly shifted.

In short, the hangover from 2023 is fading and lenders are back at the bar, here's the latest from the field…

Market momentum and price improvement

• After a hard reset in 2023, pure play venture debt BDCs are posting ~30% YoY growth in new loan volume this year—on top of 30%+ growth in 2024

• Rates are generally down ~150 – 200 bps over the last 18 months, but pricing still varies widely across lenders and situations

• Later-stage companies are successfully using debt to avoid down rounds—if metrics support it and they're not fully leveraged

• BUT…LP capital remains tight— venture debt funds are feeling it, keeping underwriting disciplined

Portfolio health has rebounded after two choppy years

• Non-accruals as a % of total portfolio are trending down (though still uneven) across the BDCs, now averaging 3% (vs an elevated 5%+ 18 months ago), and approaching historically more normalized levels in the 2% range

• Improved borrower ARR visibility and spend discipline are driving cleaner credit metrics; additionally a number of lenders have been able to 'originate' their way out of portfolio issues, focusing new loan deployments on well funded AI names

• That said, disruption to AI equity flows remains a key risk for venture lender portfolios going forward

Underwriting rigor: less twitchy—but still picky

• Priority screens: Burn multiples, unit economics, and cash runway remain priority screens

• Right-sizing premium: At the later stages (and excluding more sexier AI stories), companies with right-sizing already behind them are seeing greater lender engagement

• Equity top-ups: Fresh equity has been increasingly required for thinner-liquidity borrowers, particularly for slower growing later stage borrowers pursuing refinancings

• Fragmented Lender Stance: Risk appetite remains highly uneven; venture-backed companies running a debt process must account for a wide variance in lender posture; exploring the market fully is critical for companies with a trickier credit profile