Startup Funding Espresso -- Use of Warrants in Venture Debt
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. Warrants give the holder a number of shares to be exercised over a specified period to buy the company\u2019s stock.\xa0 Warrants play a key part in venture debt. Companies offer warrants in exchange for a lower interest rate on the debt. Investors offering venture debt use warrants to gain access to the equity upside of the business. As long as the company is solvent, the warrant will have some value.\xa0 Warrants are often offered at levels below the current market price. There are challenges with warrants.\xa0 They are tied to the performance of the company\u2019s stock price which fluctuates. They don\u2019t last forever as they have an expiration date. They don\u2019t give the investor any control rights in the company. They don\u2019t offer any dividends. Venture debt providers typically offer debt at 10-20% warrant coverage. Warrant coverage is that portion of the loan taken in the form of warrants. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. ___________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0 For Feedback please contact info@tencapital.group\xa0\xa0 Please subscribe, share, and leave a review. Music courtesy of