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Venture Debt Funding for VC backed Scale-Ups

R150m

Developmental Loan Funding for Early Stage/Seed Stage SMEs

R50m

Venture Debt Funding for

VC backed Scale-Ups

What is Venture Debt?

OBJECTIVE OF THE FUNDING

Venture Debt is an alternative source of capital for start-ups that are facing cash constraints or having difficulty closing a round of financing. It can help venture capitalist (“VC”) backed start-ups in their growth journey and create an optimal funding structure, whilst enhancing stakeholders’ value.

Venture Debt is often offered to firms that have completed one or more rounds of VC equity funding. They are businesses that have a history of operations but do not have enough positive cash flows to qualify for traditional loans. Such organizations generally employ funding to meet planned milestones and buy the capital assets required to do so.

INVESTMENT SIZE

R150m recyclable

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How does it work?

Unlike traditional loans, venture debt operates differently. It is short-to- medium-term debt (with up to three or four year loan terms). Typically, the amount raised in the most recent round of equity financing is used to calculate the principal amount of debt, which may be up to 25% of the size of the equity round.

Interest is paid on venture debt loans and the payments may be fixed or determined by reference to the prime rate. In addition, in return for the substantial default risk associated with venture debt financing, the lenders obtain warrants on the company’s common shares. Typically, 5% to 20 % of the loan’s principal amount is the amount allocated to acquire equity in the start-up

The eventual conversion price of the warrants into common shares will be the share price from the most recent equity financing round. If the warrants are converted, they typically represent 1-2% of the fully diluted shares in the company.

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Why Venture Debt?

Venture Debt helps founders minimise shareholder dilution during the early stages of their companies’ growth. It further allows for the extension of cash runway between fundraising rounds, helping companies achieve performance targets.

When a business is growing quickly or burning through cash at a higher rate, Venture Debt lowers the average cost of borrowing to support operations. Additionally, it offers flexibility because venture debt can be used as a cash reserve for unforeseen capital requirements, fundraising setbacks, and operational problems.

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Are you eligible?

  • Are you majority black-owned?
  • Do you have revenue of +R15mil p.a. and less than R50m p.a.?
  • Are you a tech-driven high growth potential scale-up?
  • Are you currently raising a Series A or B round?
  • Are you a Venture Capital-backed company?

Our terms

  • 10% – 15% Interest
  • 3 – 5-year loan term
  • Warrants
  • Security from the Borrower

Accelerate Loan for Early

Stage/Seed Stage SMEs

What is the Accelerate Loan?

OBJECTIVE OF THE FUNDING

Rapidly accessible funding targeting early-stage/ seed businesses which are majority black-owned and operate in any supply chain. For phase 1, Vumela will be only providing funding to businesses on programmes managed by Edge Growth and FNB. In future, this funding may be extended to other accredited Enterprise and Supplier Development programmes.

INVESTMENT SIZE

R50m recyclable

Are you eligible?

  • Are you majority black-owned?
  • Do you have revenue of +R1m p.a. and less than R50m p.a.?
  • Are you are a participant on an Enterprise and Supplier Development programme sponsored by FNB or managed by Edge Growth?

Our terms

  • Funding between R100k and R2m
  • 3 month to 3 year loan term
  • 5% interest which can be reduced to 0% if fully compliant with loan terms

Upcoming ESD Programmes

FNB Advancer Programme in partnership with Edge Growth: 60 participants will be selected to participate in an 18-month programme focused on supporting the growth of black owned B2B SMEs across commodities and sectors. The aim of the programme is to improve funding readiness and provide opportunities to apply for innovative funding products. Applications open 31st October 2022.

Growth Transformer Programme in partnership with Edge Growth: 25 participants will be selected to participate in a unique, 12-month programme that uses gamification, peer interaction and digital learning to ensure SMEs build habits that unlock a business’ growth potential. Applications open 16th November 2022.

If you would like to register your interest in one of these programmes

Click here

Apply for funding

Vumela’s 4th Fund is seeking majority black-owned businesses with a turnover of less than R50m that operate in any corporate supply chain.

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View Fund 4.0