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Working Capital Lines of Credit for Technology Companies

In: Praxishandbuch Finanzierung von Innovationen

Author

Listed:
  • Marta Czekaj

    (Silicon Valley Bank)

  • Bailey Morrow

    (Silicon Valley Bank)

Abstract

As businesses mature, their daily flow of funds become more stable and predictable. Where they would have previously used equity or venture debt to extend cash runway, working capital facilities help companies optimize short term capital needs. A line of credit is effectively a financing solution that can be readily tapped at the borrowers’ discretion providing flexible and revolving low-cost capital as a cushion to cover regular business operations, bridge gaps in cash flow or boost revenue. In practice, the outstanding balance is limited to the sum of a borrowing base which fluctuates according to the amount of eligible collateral, subscription revenue or cash flow. Company’s business needs, its working capital profile, as well as its spending strategy will determine which type of credit line will be the most suitable.

Suggested Citation

  • Marta Czekaj & Bailey Morrow, 2021. "Working Capital Lines of Credit for Technology Companies," Springer Books, in: Christian Hoppe (ed.), Praxishandbuch Finanzierung von Innovationen, chapter 0, pages 279-290, Springer.
    • Handle: RePEc:spr:sprchp:978-3-658-33116-0_16
    DOI: 10.1007/978-3-658-33116-0_16
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