Should You Issue Equity, Debt or Convertible Securities?
Broadly speaking, there are three types of financing transactions available to companies:
Typically, in these types of financings, preferred equity is issued to investors. Regular participants are venture capital funds, growth capital funds and some seed equity investors.
Debt financings involve entering into a term loan, a revolving line of credit or another credit facility with a bank, financial institution or state loan agency.
Convertible securities take the form of convertible notes, SAFEs, KISSes or other alternative convertible instruments. These are securities that give the investor a right to convert into preferred equity.
When deciding to offer equity, debt or convertible securities, startups should pay particular attention to:
- Financial condition
- Use of proceeds
Click on these links for more detailed information about equity, debt and convertible security financings.
For more information, please contact a member of our Early Stage & Emerging Companies practice group.