Banks & Venture Lenders want to read the fine print on your Startup’s SAFE Note & Convertible Debt Documents because if the investment is characterized as Unsecured Debt then it impacts the Lender’s underwriting of a venture debt loan.
The reason why Lenders want to know if the SAFE is debt or not is that when a Lender does not have a lien on Intellectual Property, they have to share the proceeds of the IP with unsecured creditors. This is a doomsday scenario meaning the company was not able to raise money and the Lenders are selling the assets for capital recovery. But it’s something Banks & Venture Debt firms will take into consideration when underwriting the deal.
There is no point in withholding this document in the process because the Lenders need it for their underwriting and the SAFE Note or Convertible Debt is already in place. No point in hiding the ball. :)
Kruze Consulting is a leading accounting firm working with seed and venture funded Delaware C-Corps. Funded startups choose Kruze Consulting’s team of CPAs, bookkeepers, CFOs, former IRS tax auditors, and venture experts. In addition to running the books, Kruze does tax, finance, and HR. Contact Kruze today!
Vanessa Kruze, a seasoned CPA, has an impressive track record prior to establishing Kruze Consulting. Her experience includes pivotal roles at Deloitte Tax and as a controller for a substantial startup with over 120 employees and $20 million in revenue. Under her leadership, Kruze Consulting has emerged as a distinguished CPA firm, recognized on the Inc 5000 list for five consecutive years, illustrating rapid growth and success in the competitive accounting landscape. Vanessa's unique approach, combining deep industry knowledge with advanced automation and software solutions, has positioned her firm as a leader in providing comprehensive accounting services to startups across the United States.
