Borrowing to Grow Without Giving Up Shares: The Rise of Venture Debt

Headline and Overview

Outlook Business, summarising Stride Ventures' Global Private Debt Report 2026 in an article published on 10 April 2026, reported that India's venture debt market grew from about $80 million in 2018 to $1.3 billion in 2025, roughly sixteen-fold. The number of venture debt deals rose from 11 to 187 over the same period. Growth credit, a larger-ticket product for later-stage companies, deployed $1.68 billion across 32 companies in 2025. The report's summary said that "private debt is beginning to move beyond its traditional role as a stopgap funding tool for start-ups in India", and described venture debt as "a high-volume, smaller-ticket product".

What founders said and what products are

The report cited a survey in which 62.9% of founders favoured venture debt, most seeking tickets below $5 million, while some were exploring growth credit deals of $30 million or more. Pricing was the main factor in choosing lenders, followed by flexibility and speed. Fintech dominated both segments, while consumer, B2B, logistics, healthcare and energy companies were participating more. Barriers named were gaps in credit data, regulatory clarity and standardisation.

Venture debt, according to the article, is typically senior secured lending used to extend runway, fund working capital, support capital expenditure and, sometimes, acquisitions. Growth credit is used for platform expansion, refinancing and strategic acquisitions, and underwriting relies on cash-flow visibility and asset backing.

“Venture debt continues to operate as a high-volume, smaller-ticket product.”

When debt makes sense: our framework

Debt is not free money. It must be repaid with interest regardless of how the business performs. It suits specific situations.

1. After an equity round, to extend runway. Borrowing a modest amount against fresh equity gives more time to reach a milestone before the next raise. 2. To finance predictable working capital. If you have confirmed orders or receivables from reliable customers, debt can bridge the gap between spending and collection. 3. To buy equipment with a clear payback. A machine that produces measurable output can service its own loan. 4. When dilution is costly. If the company's valuation is temporarily low, borrowing may be cheaper than selling shares.

It suits poorly when revenue is uncertain, when the product is unproven or when the loan would be used to cover ongoing losses without a path to profit.

What lenders look for and key checklist terms

Underwriting depends on cash-flow visibility and asset backing. Founders should expect questions about revenue predictability, existing investor support, burn rate, and asset security.

Checklist: • Interest rate, processing, prepayment and exit charges. • Repayment amortization and interest-only moratorium periods. • Security and hypothecated accounts. • Equity warrant kickers. • Financial covenants and default triggers.

Risks and worked illustration

Fintech concentration suggests lenders favour easily verifiable transaction flows. Companies that over-leverage risk insolvency if market conditions soften.

Hypothetical illustration: A company with an equity round and creditworthy customer orders on 90-day payment terms can use short-term debt to deliver goods and repay from collections cleanly. Using debt to finance an unproven burn rate without confirmed orders simply delays an inevitable reckoning.

Editorial analysis based on one news summary of a lender-side report; verify figures with the original.