In my last post, I compared and contrasted Venture Debt from Banks vs. Venture Debt Firms. While most Venture Debt term sheets are straightforward and fairly easy to understand, it’s important to understand what each of the terms really means to you and your company.  As such, below is my RapGenius version of a Sample Venture Debt Termsheet.   I’m not including every term you may see, but rather the key ones you should focus on (I didn’t include financial covenants as most pure play Venture Debt lines don’t have financial covenants). Sample Venture Debt Proposal Facility:  $3,000,000 Growth Capital Facility Availability: Through 12/31/13, Borrower may make draws on the line.   Draws must be at least $250,000 and shall be limited to six (6). What it means for you:  The draw period is when you can actually use the line.  After the draw period is over, no more borrowings can be made and usability expires.   Draw periods typically range from 0 to 18 months.  In most cases, a longer draw period is better for you as it allows you to borrow on the line when needed rather than being forced to borrow when you have plenty of cash in the bank.   Conversely, there IS a risk to waiting to draw as lenders typically have the ability to withhold advances if they believe a significant negative event has occurred with the business.  Amortization Period:  Each draw on the line shall amortize on a straight-line basis with equal payments of Principal and Interest over a thirty-six (36) month period. What it means for you: This is simply the length of the repayment period for each advance made on the debt, and in most cases the debt is repaid in equal installments similar to a mortgage or car loan. Interest Rate:  Wall Street Journal Prime Rate + 2.50%.  Fixed at time of each advance. What it means for you: Not much to see here. This is simply the rate you pay on the amounts you actually borrow.  The only thing you’ll want to specify here is how the Index Rate is defined (i.e. if the index is LIBOR, is it a 30 day LIBOR or something else? If the index is Prime, is the Prime Rate defined as Wall Street Journal Prime Rate or is it a Bank specified Prime Rate). You also want to keep an eye out on whether the rate is a fixed rate or floating rate.  A fixed rate option will always provide for a higher rate in a low-interest rate environment.  Final Payment (sometimes called Back-end or balloon payment): At the end of the amortization period or upon prepayment, a final payment of 4.00%...

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