“In March, I shared my faith in our friends at SVB-particularly Dennis Grunt and Matt Johnson- and my belief that innovation will always outrun fear in the long run as they worked to rebuild trust. As healthcare prices are expected to rise 7% in 2024, solutions that increase access while lowering costs are becoming increasingly important to payers and self-funded groups. The funds will be used to develop new product features for release later this year in pursuit of the company’s mission to not only ensure people have the power to pay for healthcare but also to help them more easily access quality care for better prices.
The company’s Health Payment Account solution is offered by three major carriers alongside individual marketplace health plans in seven states, four major dental carriers, and has been white labeled into a number of digitally forward health benefits companies like Gravie, who is thoughtfully enabling patient access via Gravie Pay. Paytient serves over 1,000 enterprise clients in partnership with most of the Fortune 100’s major payors. Since it was founded in 2018, the company has raised $55.5M in equity from leading investors including Mercato, Bertelsmann Investments, Lightbank, Felicis Ventures, Box Group, Lachy Groom, Left Lane Capital, Commerce Bank, Crossbeam Ventures, Cultivation Capital, and Inspired Capital. “When the IPO market shuts down, venture lenders find it harder to collect on their loans.Paytient, the creator and leading provider of Health Payment Accounts (HPAs) has finalized a $7.5M venture debt facility with Silicon Valley Bank (SVB), a division of First Citizens Bank, which was first announced in January of this year. “Venture debt is inherently risky for the simple reason that most startups do not have collateral that the lender can sell to repay the loan if the borrower can't pay,” Cohan explained. These other components include an underwriting fee, backend fee, and warrant package, according to Ellison.īut even if a startup can secure new debt financing, there are downsides. “Once the existing pipeline is worked through I expect we will see pricing increase but it will mainly be from the non-interest components,” said Ellison. With competition for fewer lenders, borrowing is likely to get even more expensive in the future. Yet today, the prime rate is 8%, making the base rate far higher for borrowers.
SVB VENTURE DEBT PLUS
Non-bank loans are offered at the same prime rate plus generally 6% to 8% interest, according to Ellison. Last year, SVB was generally offering venture loans at the prime interest rate, which was about 3.25%, plus up to 2% interest. These non-bank loans are costly for startups compared to the deal they got with SVB. “If a company raised a year ago and they haven't raised an equity round recently, but if they still have a decent runway and the metrics are right, the still make a new loan,” said Jung. While typically a bank like SVB would only extend venture debt along with a funding round, private lenders tend to give startups more leeway, according to Jung. “For our clients, we've been talking actively with the direct lenders like Western Technology Investment and Trinity Capital because they're a little bit more flexible,” he explained.
SVB VENTURE DEBT FULL
“Don't expect the bank-led venture debt to be returning in full force anytime soon,” said Jay Jung, a fractional CFO and advisor with Embarc Advisors who helps startups structure their venture debt financing. Unlike banks, which provide a range of services of which loans are just one, the business model of these private lenders is to make money from interest on debt. “SVB failing was the best thing that could have ever happened for non-bank venture debt lenders,” said Zack Ellison, the managing partner at A.R.I. So who has been rushing to fill the lending hole left by SVB for startups in need of extending their runway? Private, non-bank lenders, who notably charge higher interest rates.
0 kommentar(er)
