What is the difference between a “venture bank” and a regular “business bank”?

You may be familiar with the typical business bank. Names like Vectra Bank, Wells Fargo, Chase or KeyBank may come to mind. These banks loan money based on your demonstrated ability to pay them back with interest out of current cash flows. There are many options these banks use including lines of credit, overdraft protection, SBA loans and more.

Venture Banks are a unique type of bank that offer services primarily to venture capital backed firms. Silicon Valley Bank and Square 1 Bank are two great examples.  They get most of their clients through venture capital deals and VCs often make having a relationship with a venture bank part of their investment requirements. Venture banks serve venture backed companies that may not yet have sufficient cash flow to service a traditional loan. They build upon the relationship that the company has with its VCs and make loans for equipment, accounts receivable or other purposes.

Venture banks also differ from traditional business banks because they will typically have warrants for the purchase of stock in addition to a traditional interest rate. Warrants allow the venture bank to be compensated for their risk by sharing in the upside their companies enjoy when they have an IPO or are acquired by a larger company.

To learn more about venture banking and business banking and what they have to offer, and to meet some of the leading venture and business bankers in Colorado, be sure to attend the Rockies Venture Club “Banking Strategies for Startups” event Tuesday June 11th at 5:00. Register for Angel Capital Summit 2013

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  1. […] your startup best. As such, the questions were posed: How does your bank serve entrepreneurs? And how are venture banks different from commercial banks? “Square 1 Bank serves entrepreneurs better than traditional banks because our bank is focused […]

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