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Venture debt lenders will play a big role in fire sales and startup shutdown this year, experts say
When accounting startup Bench abruptly failed last month, the shutdown was forced when the company's lenders called in the startup’s loan. In late 2023,
Although the specific role of Divvy’s lenders in the sale is unclear, the company borrowed $735 million from Barclays, Goldman Sachs, Cross River Bank, and others in 2021. Too much debt compared to a startup’s income or cash reserves can result in a forced fire sale, where a company is sold for a fraction of its previous value. If startups can convince new or existing VCs to inject more cash by buying more equity, they can avoid a lender taking action should they fall behind in payments or other aspects of their agreements.
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