Technology Sector Private Credit: European Innovation Funding

Essential Insights for Technology Companies and Investors

Table of Contents

• Understanding Technology Private Credit in Europe’s Innovation Economy
• Why European Tech Companies Turn to Private Credit Financing
• Key Technology Sectors Attracting Private Credit Investment
• Leading Private Credit Providers for European Tech Firms
• How Does Private Credit Fund European Technology Companies?
• Technology Private Credit Terms and Deal Structures Explained
• Risk Assessment in Technology Private Lending Markets
• Future Outlook for European Tech Innovation Funding

Europe’s technology sector faces a persistent funding challenge that traditional financing sources struggle to address. With a funding gap exceeding €100 billion annually, innovative companies seeking growth capital often find themselves caught between dilutive venture capital rounds and restrictive bank lending requirements. Technology private credit has emerged as a compelling solution, offering European tech firms non-dilutive capital that bridges this critical gap in the innovation funding landscape.

As the European innovation economy matures, private credit providers have developed sophisticated lending products tailored specifically to technology companies. These specialised financing solutions recognise the unique characteristics of tech businesses, from recurring revenue models to intellectual property assets, creating opportunities for growth-stage companies to access substantial capital without surrendering equity or control.

This comprehensive analysis explores how technology private credit functions within Europe’s innovation ecosystem, examining the key sectors attracting investment, the leading providers reshaping the market, and the structural terms that define these increasingly important financing arrangements. Understanding this evolving landscape is essential for technology executives, investors, and financial professionals navigating Europe’s dynamic tech debt markets.

Understanding Technology Private Credit in Europe’s Innovation Economy

Technology private credit represents a specialised segment of the private debt market focused exclusively on providing non-bank lending solutions to technology companies across various growth stages. Unlike traditional corporate lending, European tech credit recognises the intangible asset base and future cash flow potential that characterises innovative businesses, structuring facilities around metrics such as recurring revenue, customer retention, and intellectual property value rather than conventional balance sheet assets.

The European technology private credit market has experienced remarkable expansion, growing from approximately €8 billion in 2018 to an estimated €25 billion in assets under management by 2024. This growth trajectory reflects both increased demand from technology companies seeking alternatives to equity financing and the maturation of specialised lending platforms capable of assessing technology-specific risks. The market encompasses venture debt for early-stage companies, growth debt for scale-ups, and structured credit facilities for established technology enterprises.

European tech lending differs substantially from its more mature American counterpart in several key dimensions. The European market features greater fragmentation across jurisdictions, with varying legal frameworks, insolvency regimes, and creditor protections influencing deal structures. Additionally, European technology companies typically demonstrate more conservative growth profiles and lower burn rates compared to US counterparts, resulting in different risk-return dynamics for private credit providers.

The innovation economy funding landscape positions technology private credit as a complementary capital source rather than a replacement for equity investment. Most European tech companies utilise private debt strategically alongside venture capital or private equity, extending runway between equity rounds, financing specific growth initiatives, or providing working capital flexibility. This integrated approach to the capital structure has become increasingly sophisticated as both lenders and borrowers develop deeper expertise in technology direct lending arrangements.

Market participants include dedicated technology debt funds, private credit arms of major institutional investors, and boutique lending platforms with sector-specific expertise. The competitive dynamics have intensified as traditional banks cautiously re-enter technology lending and new entrants recognise the attractive risk-adjusted returns available in this segment, creating a more diverse and accessible funding environment for European innovation companies.

Why European Tech Companies Turn to Private Credit Financing

European technology companies increasingly favour private credit financing due to fundamental limitations in traditional bank lending for innovation-driven businesses. Conventional banks typically require tangible collateral, positive cash flow, and established profitability metrics that many growth-stage tech companies cannot provide. The asset-light nature of software businesses, combined with significant upfront investment requirements and delayed profitability timelines, creates a structural mismatch with traditional banking credit criteria, leaving a substantial portion of viable technology companies underserved by the banking sector.

Equity dilution concerns represent another primary driver behind the adoption of technology private credit. Venture capital and private equity financing, whilst providing essential growth capital, progressively dilute founder ownership and influence over strategic decisions. For companies with proven business models and predictable revenue streams, private debt offers an attractive alternative that preserves equity value for existing shareholders. This non-dilutive capital advantage becomes particularly compelling for founders who have already completed multiple equity rounds and wish to maintain control whilst accessing growth funding.

The flexibility inherent in private credit structures appeals to technology executives seeking tailored financing solutions. Unlike rigid bank facilities or equity rounds with extensive governance requirements, European tech credit providers can structure bespoke arrangements addressing specific company needs. Whether financing a strategic acquisition, expanding into new markets, extending product development timelines, or bridging to profitability, private credit facilities can be customised with appropriate covenants, repayment schedules, and pricing mechanisms aligned with company-specific circumstances.

Speed to funding represents a critical competitive advantage for private credit in the European technology lending market. Traditional bank processes often require three to six months from initial application to funding, whilst equity rounds can extend even longer due to extensive due diligence and negotiation processes. Specialised technology lenders, leveraging deep sector expertise and streamlined evaluation frameworks, can complete transactions in four to eight weeks, enabling companies to capitalise on time-sensitive opportunities or address urgent capital needs without protracted fundraising distractions.

Several prominent European technology companies have successfully utilised private credit to accelerate growth whilst preserving equity value. SaaS platforms with annual recurring revenue exceeding €10 million frequently access venture debt facilities to extend runway between Series B and Series C rounds. Fintech companies leverage revenue-based financing structures that align repayment obligations with transaction volumes. These real-world applications demonstrate how innovation private finance has become an integral component of sophisticated capital structure strategies across Europe’s technology ecosystem.

Key Technology Sectors Attracting Private Credit Investment

Software-as-a-Service companies represent the most attractive segment for technology private credit providers in Europe, accounting for approximately 40% of tech lending volume. The recurring revenue model inherent to SaaS businesses provides predictable cash flows that lenders can underwrite with confidence, whilst high gross margins and scalable business models support debt servicing capacity. European SaaS companies with annual recurring revenue exceeding €5 million, net revenue retention above 100%, and clear paths to profitability typically qualify for substantial credit facilities, often ranging from 30% to 50% of annual recurring revenue.

Fintech and payment platforms constitute another priority sector for private credit investment, driven by regulatory maturation and proven business models across digital banking, payments processing, and financial infrastructure. These companies often generate transaction-based revenues with strong unit economics, creating cash flow profiles suitable for debt financing. However, fintech private credit requires specialised expertise in regulatory compliance, capital adequacy requirements, and sector-specific risks, leading to concentration among lenders with dedicated fintech capabilities and relationships with European regulatory authorities.

Healthcare technology and digital health companies have emerged as significant recipients of innovation funding Europe, particularly following accelerated adoption during the pandemic period. Telemedicine platforms, healthcare data analytics providers, and medical device software companies attract private credit based on contracted revenues from healthcare systems, insurance relationships, and regulatory approvals that de-risk future cash flows. The sector’s defensive characteristics and essential nature provide downside protection that appeals to conservative private debt funds technology strategies.

Clean technology and sustainability innovation represent rapidly growing segments within the European tech private lending landscape, supported by regulatory tailwinds and increasing corporate sustainability commitments. Companies developing energy management software, carbon tracking platforms, circular economy solutions, and renewable energy technologies access specialised credit facilities that recognise both commercial viability and environmental impact metrics. Some lenders incorporate sustainability-linked pricing mechanisms that reward achievement of environmental targets, aligning financial incentives with broader societal objectives.

Deep technology companies focused on artificial intelligence, machine learning, and advanced computing present more complex opportunities for private credit providers. Whilst these businesses often possess significant intellectual property value and transformative potential, longer development timelines and binary outcome risks require careful structuring. Lenders typically focus on companies with proven commercial traction, established customer relationships, and clear revenue visibility rather than pure research-stage ventures. E-commerce and marketplace platforms round out the key sectors, with lenders evaluating gross merchandise value, take rates, and customer acquisition economics to structure appropriate facilities for these capital-intensive business models.

Leading Private Credit Providers for European Tech Firms

The European technology credit landscape features a diverse ecosystem of specialised lenders, each bringing distinct capabilities and strategic focus to the market. Dedicated technology debt funds represent the most active category, with firms such as Kreos Capital, Claret Capital, and Pemberton managing multi-billion euro vehicles exclusively focused on innovation economy funding. These specialist providers typically offer facilities ranging from €5 million to €50 million, targeting growth-stage companies with established revenue traction and clear paths to profitability across key European markets including the United Kingdom, France, Germany, and the Nordic region.

Private credit arms of major institutional investors have increasingly allocated capital to European tech debt markets, recognising attractive risk-adjusted returns and portfolio diversification benefits. Large alternative asset managers including Partners Group, Ares Management, and Intermediate Capital Group have established dedicated technology lending teams, leveraging extensive due diligence resources and global networks to underwrite larger transactions. These institutional platforms typically focus on later-stage companies and can provide facilities exceeding €100 million for established technology enterprises, often in conjunction with broader financing relationships.

The geographic dimension of European technology direct lending reveals interesting patterns, with US-based lenders maintaining significant presence alongside domestic European providers. American venture debt pioneers such as Silicon Valley Bank and Hercules Capital established European operations to serve portfolio companies expanding internationally, bringing deep sector expertise and established underwriting frameworks. However, European-headquartered lenders possess advantages in local market knowledge, regulatory familiarity, and relationships with regional venture capital firms, creating a competitive dynamic that benefits borrowers through increased choice and competitive pricing.

Boutique technology lending firms occupy an important niche, providing specialised expertise in specific sectors or company stages. Firms focusing exclusively on SaaS financing solutions, fintech private credit, or early-stage venture debt can offer more flexible terms and faster execution than larger, more bureaucratic organisations. These boutique providers typically manage smaller fund sizes, ranging from €100 million to €500 million, but compensate through deep sector knowledge, entrepreneurial decision-making processes, and willingness to support companies that may fall outside the parameters of larger institutional lenders.

Fund sizes and deployment strategies vary considerably across the European tech credit provider landscape. Smaller funds targeting early-stage venture debt typically write cheques between €2 million and €10 million, whilst growth debt specialists focus on the €10 million to €50 million range, and structured credit providers for mature technology companies can deploy €50 million to €200 million in individual transactions. Geographic focus also differs, with some lenders maintaining pan-European mandates whilst others concentrate on specific markets where they possess competitive advantages in origination, due diligence, or portfolio management capabilities.

How Does Private Credit Fund European Technology Companies?

Private credit funds European technology companies through a structured process beginning with origination and initial screening. Lenders typically source opportunities through relationships with venture capital firms, private equity sponsors, investment banks, and direct company outreach. The initial evaluation focuses on fundamental eligibility criteria including minimum revenue thresholds, recurring revenue characteristics, customer diversification, and existing equity backing. Companies meeting preliminary requirements proceed to detailed due diligence, whilst those falling short receive feedback on milestones required to qualify for future consideration.

The due diligence phase for technology private lending encompasses both financial and operational assessments tailored to innovation businesses. Financial analysis examines revenue quality, focusing on metrics such as annual recurring revenue, monthly recurring revenue growth rates, gross retention, net retention, customer acquisition costs, and lifetime value ratios. Lenders scrutinise the sustainability of growth rates, unit economics, and cash flow generation potential rather than relying solely on historical profitability. Operational due diligence evaluates technology infrastructure, product roadmaps, competitive positioning, management team capabilities, and intellectual property protection, often involving technical experts who can assess the underlying technology and market opportunity.

Documentation and covenant structures in European tech credit facilities differ substantially from traditional corporate lending arrangements. Rather than asset-based security packages, lenders typically take security over all company assets including intellectual property, whilst recognising that enforcement value may be limited. Financial covenants often focus on forward-looking metrics such as minimum recurring revenue levels, maximum burn rates, and minimum cash balances rather than backward-looking profitability measures. Operational covenants may include requirements to maintain key customer relationships, preserve intellectual property rights, and achieve specified product development milestones, creating alignment between lender interests and company success.

The typical timeline from initial application to funding ranges from six to ten weeks for straightforward transactions, though complex situations may require additional time. The process begins with preliminary discussions and term sheet negotiation, followed by two to three weeks of intensive due diligence, legal documentation requiring an additional two to three weeks, and final approval and funding. This compressed timeline compared to traditional bank lending or equity fundraising represents a significant advantage for technology companies requiring rapid access to capital for time-sensitive opportunities or urgent working capital needs.

Integration with equity rounds represents a sophisticated aspect of how innovation private finance functions within the broader capital structure. Many technology companies raise debt facilities in conjunction with equity rounds, using the combination to maximise available capital whilst minimising dilution. Lenders coordinate closely with equity investors to ensure appropriate subordination arrangements, intercreditor agreements, and information rights that protect all stakeholders. Warrant and equity kicker structures provide lenders with upside participation, typically ranging from 5% to 15% warrant coverage, aligning interests and compensating for the higher risk profile of technology lending compared to traditional corporate debt.

Technology Private Credit Terms and Deal Structures Explained

Technology private credit facilities in Europe typically range from €5 million to €100 million, with the specific size determined by company revenue scale, growth trajectory, and intended use of proceeds. Early-stage venture debt for companies with €3 million to €10 million in annual recurring revenue generally falls in the €2 million to €10 million range, whilst growth debt for scale-ups with €10 million to €50 million in revenue typically spans €10 million to €30 million. Established technology companies with revenues exceeding €50 million can access structured credit facilities of €50 million to €100 million or more, particularly when supporting acquisitions or significant expansion initiatives.

Interest rate structures for tech private lending reflect the higher risk profile compared to traditional corporate debt, with all-in pricing typically ranging from 8% to 15% annually. The rate comprises a base interest component, often linked to EURIBOR or SONIA plus a margin of 6% to 12%, alongside arrangement fees of 2% to 4% and potential success fees tied to company milestones. Some lenders offer payment-in-kind interest options allowing companies to capitalise interest during high-growth phases, whilst others structure revenue-based repayment mechanisms where obligations scale with company performance, providing flexibility during periods of slower growth or market volatility.

Loan-to-value ratios in technology asset-based lending differ fundamentally from traditional secured lending due to the intangible nature of tech company assets. Rather than lending against physical collateral, private credit providers typically advance 30% to 50% of annual recurring revenue for SaaS companies, or 20% to 40% of projected twelve-month revenues for other technology business models. These ratios reflect the predictability and quality of revenue streams rather than liquidation values, with higher multiples available to companies demonstrating superior retention metrics, diversified customer bases, and strong unit economics supporting sustainable growth trajectories.

Covenant packages in European technology credit facilities balance lender protection with operational flexibility required by growth companies. Financial covenants typically include minimum recurring revenue thresholds, maximum monthly burn rates, and minimum liquidity requirements rather than traditional leverage or interest coverage ratios inappropriate for pre-profitable companies. Many facilities incorporate growth-oriented covenants requiring companies to achieve specified revenue milestones or customer acquisition targets, creating alignment between debt servicing capacity and business performance. Covenant testing frequency varies from monthly for early-stage companies to quarterly for more mature businesses, with cure rights and equity cure provisions providing flexibility to address temporary breaches.

Maturity profiles and amortisation schedules reflect the growth orientation of technology private lending, with typical terms spanning three to five years and limited amortisation during the initial period. Many facilities feature interest-only periods of twelve to twenty-four months, allowing companies to invest in growth before principal repayment commences. Amortisation structures often incorporate revenue-based components where repayment obligations increase as companies scale, or bullet repayment structures anticipating refinancing through subsequent equity rounds or cash flow generation. Warrant coverage ranging from 5% to 15% of the facility amount provides lenders with equity upside participation, compensating for subordinated positions and higher default risk whilst aligning interests with company success and creating potential for enhanced returns beyond contractual interest payments.

Risk Assessment in Technology Private Lending Markets

Technology private lending presents unique risk characteristics that distinguish it from traditional corporate debt markets, requiring specialised assessment frameworks and risk mitigation strategies. Revenue volatility represents a primary concern, as technology companies often experience significant fluctuations in growth rates due to market dynamics, competitive pressures, or execution challenges. Unlike established businesses with stable cash flows, tech companies may face rapid customer churn, pricing pressure, or product obsolescence that materially impacts debt servicing capacity within short timeframes. Lenders address this risk through detailed analysis of revenue quality metrics, customer concentration, and retention characteristics that indicate sustainability of cash flow generation.

Burn rate analysis constitutes a critical component of technology private lending risk assessment, particularly for pre-profitable companies relying on external capital to fund operations. Lenders evaluate the relationship between available liquidity, monthly cash consumption, and projected timeline to profitability or next equity round, ensuring adequate runway exists to weather potential setbacks. Covenant structures often incorporate maximum burn rate thresholds and minimum cash balance requirements, creating early warning mechanisms that trigger lender involvement before liquidity crises emerge. Sophisticated lenders model various scenarios including delayed revenue ramps, increased competition, or market downturns to stress-test company resilience and debt servicing capacity under adverse conditions.

Technology obsolescence considerations add complexity to risk assessment in innovation economy funding, as rapid technological change can render products or platforms less competitive within compressed timeframes. Lenders evaluate product roadmaps, research and development capabilities, and competitive positioning to assess sustainability of market position and revenue streams. Companies operating in sectors with high innovation velocity or low barriers to entry face greater obsolescence risk, potentially warranting more conservative leverage levels or enhanced monitoring requirements. The intellectual property portfolio, technical team capabilities, and customer switching costs provide indicators of defensibility against technological disruption that inform credit decisions and ongoing portfolio management.

Customer concentration risk requires careful evaluation in technology private lending, as many growth-stage companies derive disproportionate revenue from limited customer relationships. Loss of a major customer representing 20% or more of revenue can severely impact debt servicing capacity and company valuation, creating potential credit losses for lenders. Covenant packages typically include customer concentration limits and notification requirements for material customer losses, whilst due diligence examines contract terms, renewal rates, and relationship depth with key accounts. Diversification across customer segments, industries, and geographies provides risk mitigation that supports higher leverage levels and more favourable pricing terms.

Default rates in European tech private credit have historically ranged from 2% to 5% annually, comparing favourably to high-yield corporate debt but exceeding investment-grade benchmarks. However, loss-given-default rates tend to be higher due to limited asset recovery values, resulting in loss rates of 1% to 3% for well-managed portfolios. Risk mitigation strategies employed by sophisticated lenders include portfolio diversification across sectors, stages, and geographies, active monitoring and early intervention when performance deteriorates, and structural protections such as cash flow sweeps and equity cure rights. The integration of technology in distressed loans management has enhanced lenders’ ability to identify early warning signals and implement proactive workout strategies, improving recovery outcomes when credits deteriorate and reducing overall portfolio loss rates through data-driven decision making.

Future Outlook for European Tech Innovation Funding

The European technology private credit market is projected to experience continued robust growth through 2027, with assets under management expected to reach €45 billion to €55 billion, representing a compound annual growth rate of 15% to 20%. This expansion reflects multiple converging factors including the maturation of Europe’s technology ecosystem, increasing sophistication among both lenders and borrowers, and growing institutional investor allocation to private credit strategies. The funding gap for European innovation companies remains substantial, with traditional banks unlikely to significantly increase technology lending exposure, creating sustained demand for non-bank financing solutions across the growth spectrum from venture debt to structured credit facilities.

Emerging trends in artificial intelligence lending and climate technology focus are reshaping the European tech debt markets landscape. AI and machine learning companies represent the fastest-growing segment, with lenders developing specialised expertise in evaluating data assets, model performance, and commercial applications of artificial intelligence technologies. The capital-intensive nature of AI development, combined with substantial revenue potential for successful applications, creates opportunities for larger facility sizes and innovative structures linking repayment to model performance or customer adoption metrics. Climate technology financing similarly benefits from regulatory support, corporate sustainability commitments, and growing investor focus on environmental impact, with some lenders offering preferential pricing for companies achieving verified carbon reduction or circular economy objectives.

Regulatory developments will significantly influence the evolution of technology private lending in Europe over the coming years. The implementation of Basel IV capital requirements may further constrain bank lending to technology companies, expanding opportunities for non-bank lenders whilst potentially increasing regulatory scrutiny of private credit markets. European Union initiatives promoting capital markets union and cross-border investment could facilitate larger fund sizes and more efficient capital deployment across member states. Conversely, potential regulation of private credit markets or enhanced disclosure requirements might impact fund economics and operational complexity, requiring adaptation by market participants to maintain competitive positioning.

Competition and market maturation dynamics suggest a bifurcation between commoditised lending for established SaaS companies with proven business models and specialised financing for emerging sectors or complex situations. The former category may experience pricing compression as competition intensifies and standardised underwriting frameworks emerge, whilst the latter maintains premium pricing reflecting specialised expertise and higher risk profiles. New entrants including corporate venture arms, family offices, and sovereign wealth funds are expanding the capital available for European innovation funding, creating a more diverse and competitive landscape that benefits borrowers through increased choice, improved terms, and faster execution capabilities.

Strategic opportunities for both borrowers and investors will continue evolving as the market matures. Technology companies should develop sophisticated capital structure strategies integrating equity and debt financing to optimise dilution, maintain flexibility, and support growth objectives. Proactive engagement with multiple lenders, transparent financial reporting, and clear articulation of business strategy enhance access to competitive financing terms. For investors, European tech private credit offers attractive risk-adjusted returns, portfolio diversification benefits, and exposure to the innovation economy with downside protection through structural seniority and covenant packages. The convergence of technology expertise and credit discipline will define successful participants in this dynamic and rapidly evolving segment of European innovation funding markets.

Conclusion

Technology private credit has established itself as an essential component of Europe’s innovation funding ecosystem, providing growth capital that bridges the gap between traditional bank lending and equity financing. The market’s rapid expansion reflects both the maturation of Europe’s technology sector and the development of specialised lending capabilities that recognise the unique characteristics of innovation-driven businesses. From SaaS companies seeking non-dilutive growth capital to fintech platforms requiring flexible financing structures, private credit offers tailored solutions that preserve equity value whilst supporting ambitious expansion plans.

For technology companies considering private credit financing, success requires careful evaluation of capital structure implications, thorough preparation of financial and operational metrics, and strategic selection of lending partners aligned with company stage and sector focus. The most effective approach integrates debt financing within a broader capital strategy that balances growth objectives, dilution concerns, and financial flexibility across multiple funding sources. As the European tech debt markets continue evolving, companies that develop sophisticated understanding of available financing options and proactive relationships with specialised lenders will be best positioned to capitalise on the substantial opportunities within this dynamic segment of innovation economy funding.

Frequently Asked Questions

What is technology private credit and how does it work?

Technology private credit is non-bank lending specifically designed for technology companies, providing debt financing that recognises intangible assets and future cash flow potential rather than traditional collateral. It works by advancing capital based on metrics like annual recurring revenue (typically 30-50% of ARR for SaaS companies), customer retention rates, and growth trajectories. Lenders structure facilities with interest rates ranging from 8-15% annually, covenant packages focused on forward-looking metrics, and warrant coverage of 5-15% for equity upside participation. The financing allows tech companies to access growth capital without diluting equity ownership.

How much can European tech companies borrow through private credit?

European technology companies can typically borrow between €5 million and €100 million through private credit, depending on their revenue scale and growth stage. Early-stage companies with €3-10 million in annual recurring revenue generally access €2-10 million in venture debt. Growth-stage companies with €10-50 million in revenue can secure €10-30 million in growth debt facilities. Established technology enterprises exceeding €50 million in revenue may access structured credit facilities of €50-100 million or more, particularly for acquisitions or major expansion initiatives.

What are the typical interest rates for technology private credit in Europe?

Technology private credit in Europe typically carries all-in interest rates ranging from 8% to 15% annually. This comprises a base interest rate (often EURIBOR or SONIA plus a margin of 6-12%), arrangement fees of 2-4%, and potential success fees tied to company milestones. The specific rate depends on factors including company stage, revenue predictability, customer concentration, and overall risk profile. Some lenders offer payment-in-kind options or revenue-based repayment structures that provide additional flexibility during high-growth phases.

What technology sectors attract the most private credit investment in Europe?

Software-as-a-Service (SaaS) companies represent the largest segment, accounting for approximately 40% of European tech lending volume due to their recurring revenue models and predictable cash flows. Fintech and payment platforms constitute the second-largest category, followed by healthcare technology and digital health companies. Clean technology and sustainability innovation represent rapidly growing segments supported by regulatory tailwinds. Artificial intelligence and machine learning companies are emerging as the fastest-growing category, whilst e-commerce and marketplace platforms round out the key sectors attracting private credit investment.

How long does it take to secure technology private credit financing?

The typical timeline to secure technology private credit financing ranges from six to ten weeks for straightforward transactions. The process includes preliminary discussions and term sheet negotiation (1-2 weeks), intensive due diligence examining financial metrics and operational capabilities (2-3 weeks), legal documentation and covenant negotiation (2-3 weeks), and final approval and funding (1 week). This compressed timeline compared to traditional bank lending (3-6 months) or equity fundraising represents a significant advantage for technology companies requiring rapid access to capital.

What are the main advantages of private credit over equity financing for tech companies?

Private credit offers several key advantages over equity financing for technology companies. First, it provides non-dilutive capital that preserves founder ownership and control without surrendering equity stakes or board seats. Second, it offers greater flexibility through customised structures tailored to specific company needs and growth plans. Third, it provides faster execution with funding timelines of 6-10 weeks versus several months for equity rounds. Fourth, it extends runway between equity rounds, allowing companies to achieve higher valuations before raising additional equity. Finally, it enables companies with proven business models and predictable revenues to access substantial growth capital whilst maintaining strategic independence.

What financial metrics do private credit lenders evaluate for technology companies?

Private credit lenders evaluate technology-specific financial metrics rather than traditional profitability measures. Key metrics include annual recurring revenue (ARR) and monthly recurring revenue (MRR) with growth rates, gross retention and net retention rates (ideally above 90% and 100% respectively), customer acquisition cost (CAC) to lifetime value (LTV) ratios (typically 3:1 or better), revenue concentration across customers, monthly burn rate and runway to profitability or next funding round, and unit economics demonstrating scalable business models. Lenders also assess forward-looking projections, covenant compliance capacity, and cash flow generation potential under various scenarios to determine appropriate facility sizes and terms.