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The Possibility and the Way to Introduce of Venture Debt to Encourage Growth of Ventures  

Hong, Jong Soo (Korea Small Business Institute)
Na, Sumi (Korea Small Business Institute)
Park, Jaesung James (Korea Small Business Institute)
Publication Information
Asia-Pacific Journal of Business Venturing and Entrepreneurship / v.15, no.4, 2020 , pp. 17-25 More about this Journal
Abstract
Venture debt is a prominent funding tool to promote scale-up of ventures. In the growth stage, venture firms that need large-scale funding can accelerate their growth by leveraging venture debt without diluting their shares, while venture capitals can quickly recollect their investments by accelerating the growth of the ventures they invest. By supplying venture debt, banks can diversify their asset primarily concentrated on loans, and improve the return on assets. As in the case of Silicon Valley Bank, a leading venture lender, closer cooperation between the two agents is essential to supply venture debt. One is the venture capital, an equity capital supplier, and the other is the bank, a debt capital supplier. To this end, we propose "credit risk sharing venture loans" and "venture loan pooling". The former encourages banks' participation in the venture debt market where the manager of Korean Fund of Funds, KVIC and policy guarantee schemes such as KODIT and KIBO screen or partially absorbe the risks inherent in venture loans. The latter reduces the burden of banking on individual venture loans through securitization.
Keywords
Venture Debt; Scale-up; growth; recollection; Silicon Valley Bank; Venture Capital;
Citations & Related Records
Times Cited By KSCI : 2  (Citation Analysis)
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