Raising capital to finance growth is a common challenge for high-growth tech companies. Given traditional forms of debt financing can be limited, high growth innovative companies have relied primarily upon equity financing for growth. Venture debt has emerged as a popular solution as it offers lower cost capital and minimizes equity dilution but is often constrained to companies with a specific venture investor syndicate. We think there’s a need for alternative forms of credit that are more closely aligned with a company’s growth opportunities, and less focused on a history of venture capital financing.
At PFG we’re challenging the status quo by offering a more expansive approach to, and definition of venture debt, which we call growth debt.
Growth debt has been our focus for the last 20 years because it provides tech-enabled companies with a more expansive range of custom debt capital solutions without the constraints that often restrict most commercial banks and venture debt lenders, including specific investor syndicates, among other conditions. Learn more about PFG’s Story.
We’ll dive deeper into what growth debt is, how it works, and why it’s a recommended solution for tech companies seeking to fund sustained growth.
1. What is Growth Debt?
Growth debt is a bespoke form of credit that supports technology, healthcare and innovation sector companies in their quest to achieve stable growth by providing them with the capital they need to scale their businesses. Unlike traditional debt financing that may be restrictive, growth debt is explicitly designed to fuel expansion, allowing businesses to invest in product development, sales and marketing strategies, enter new markets, fund acquisitions, among other financing needs.
2. How Does Growth Debt Work?
Growth debt is a sophisticated form of financing that requires a deep understanding of a company’s industry, market position, and its growth strategies. At PFG we work closely with our portfolio companies to understand their business trajectory, funding needs, and challenges. We carefully tailor our solutions to meet the specific requirements of our borrowers, rather than offer financing based on a template, like how a bank might operate. Growth debt comes in different forms, including term loans, revolving credit facilities, acquisition financing and asset-based lending.
3. The Benefits of Growth Debt
Growth debt has several advantages over other forms of credit, making it a preferred funding solution for fast-growing tech companies.
First, it provides lower cost capital compared to equity financing. With growth debt, businesses don’t have to sacrifice substantial equity or control to achieve their growth objectives.
It is flexible, allowing businesses to tailor their financing to meet their capital needs at different stages of growth, from private to already public. It can help companies who have not raised venture capital or do not plan to raise future venture capital. It can be suited for businesses that may have raised venture capital in the past but are not looking or cannot access venture in the future.
Finally, growth debt helps companies remain disciplined in their capitalization to ensure they are growing in a financially responsible and sustainable way, rather than maximizing capital funding and ending up with burdensome debt that is not coordinated with the stage of the business.
4. The Role of Growth Capital Partners
Similar to how growth equity investors provide capital to high growth companies, we specialize in offering growth debt at key stages of the company’s acceleration. We’re dedicated to helping visionary entrepreneurs and management teams achieve their goals and realize their full potential. As a growth capital partner, we bring to bear our unique blend of venture, entrepreneurial and finance industry insights to support our portfolio companies’ growth journeys.
In conclusion, growth debt represents a more expansive, company-centric, and beneficial form of credit that suits the unique needs of high growth companies with a broad range of investor profiles. We’re committed to empowering tech entrepreneurs and management teams to achieve their growth ambitions by providing bespoke growth debt solutions, nurturing long-term partnerships, and offering expertise and support.
Learn more about the companies we partner with.
SVB is a leading American bank providing products, services and strategic advice for businesses at every stage. They operate as a go-to commercial bank for start-ups and established corporations, offering venture funding, private banking & wealth advising. SVB is the largest lender to technology companies globally.
SVB has built its reputation as the financial partner of the innovation economy – helping individuals, investors and the world’s most innovative companies achieve extraordinary outcomes.
PFG and SVB have maintained an official strategic partnership since the late 1980’s. We have collaborated together as co-lenders and extended each other's ability to reach new markets and provide deeper capital to high-growth companies.
PFG and SVB have provided growth debt across the U.S. & Canada, Europe, Middle East, Asia, and Latin America, where we co-manage a Venture Debt Latin America Growth Lending Fund.
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. IFC works in more than 100 countries, using its capital, expertise, and influence to create markets and opportunities in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity.
PFG and IFC are strategic partners where we extend IFC’s direct venture and VC funding, collaborating on fintech and tech lending across global growth markets.
Aims to be the partner of choice for the private sector in Latin America and the Caribbean. They finance projects to advance clean energy, modernize agriculture, strengthen transportation systems and expand access to financing.
IDB Invest, a member of the IDB Group, is a multilateral development bank committed to promoting the economic development of its member countries in Latin America and the Caribbean through the private sector. IDB Invest finances sustainable companies and projects to achieve financial results and maximize economic, social, and environmental development in the region. With a portfolio of $16.3 billion in asset management and 347 clients in 25 countries, IDB Invest provides innovative financial solutions and advisory services that meet the needs of its clients in a variety of industries.
PFG leads a joint venture with IDB Invest that provides debt capital to emerging innovative tech companies across the region via our Latin America Growth Lending Fund. The initiative brings investment expertise into LAC from top notch global players in this field.