Frequently asked questions

What is a typical deal size?
What currencies can be borrowed in?
What is the difference between a working capital loan and equipment financing?
Can both hard and soft costs be financed?
What is the real attraction of a working capital loan to founders and executives?
How are the loans repaid?
What security is required?
Why are warrants included in the financing package?
How long do transactions take to be approved?

What is a typical deal size?
ETV CAPITAL can fund transactions as small as €1,000,000 or its equivalent in another currency and as large as €5,000,000. Most deals done are in the range €1,500,000 to €3,000,000. For larger deals a syndicate of borrowers can be organised, the largest undertaken to date being the equivalent of £14,600,000, where three lenders came together to meet the borrower's needs.

What currencies can be borrowed in?
ETV CAPITAL arranges working capital loans and equipment financing in one of three currencies, Sterling, US dollars or Euros. Other currency options may be available in particular circumstances.

What is the difference between a working capital loan and equipment financing?
A working capital loan can be used by the borrower to finance any aspect of the business, from general corporate needs such as funding a shortfall in cash flow, to payroll costs or the roll out of a marketing programme and increased sales activity. In contrast, an equipment financing package is designed to finance the cost of acquiring specific assets, or costs associated with building a manufacturing capability, or fitting out a new laboratory.

Can both hard and soft costs be financed?
Yes. An equipment loan package is typically used to finance hard assets, with a small component of soft cost funding available. However, if the financing need is for a larger component of soft costs, an ETV CAPITAL working capital loan may be more appropriate.

What is the real attraction of a working capital loan to founders and executives?
Building a new and successful company is a challenging business and the rewards, when they come, are well deserved. What tends to happen, however, as the Business Plan calls for more and more funding, is that the percentage of the company owned by the founders and the executive management is reduced by successive rounds of equity financing. Dilution, in other words, becomes a real issue. But if a working capital loan is taken out, in substitution for part of a proposed equity round, the early stage investors and those who run the business can keep a greater proportion of the company than would be the case if the funds required were made available solely by venture capitalists.

How are the loans repaid?
The typical financing package involves a three year facility and the repayment terms call for monthly repayments of principal and payments of interest. The interest rate is fixed at the outset and the monthly payment to ETV CAPITAL is therefore for a fixed amount.

What security is required?
In the case of working capital loans, ETV CAPITAL takes a charge over the borrower's assets, including the intellectual property. This is merely a fall-back position and in no way hampers the borrower from developing the business, entering into collaborative ventures with other companies or licensing its technology. In the case of equipment loans, ETV CAPITAL simply takes a charge over the assets being financed.

Why are warrants included in the financing package?
Whether the transaction is a working capital or an equipment loan, ETV CAPITAL receives warrants over a number of shares in the borrowing company. This is because the borrowers themselves are young companies and frequently have negative cash flow. The product or service or drug in question may only be in the development stage and consequently the risk of lending may be higher than commercial banks, for example, would entertain. The warrants awarded to ETV CAPITAL may compensate for the higher risk it accepts.

How long do transactions take to be approved ?
Once the terms and conditions have been agreed, due diligence is begun involving a review of the Business Plan, visits to the borrowing company, an assessment of the "space" in which the borrower operates and conference calls with the venture capital companies already supporting the business. Occasionally, with the borrower's permission, customers or prospective customers are contacted. An investment proposal is then prepared for submission to the Credit Committee and documentation is drawn up. The whole process takes about eight weeks.