This article is adapted from an Operators Guild Focus Session, Debt Decoded: Analyzing Debt Structures, featuring insights from three seasoned operators in our community. Focus Sessions are small-group, member-only deep dives where operators pressure-test decisions, share lived experience, and get into the practical realities that don’t make it into blog posts or conference talks. If you want access to conversations like this — the recordings, the decks, and the community behind them — you can apply to join OG.
Debt strategy has become a critical skill for modern operators — and not just CFOs. In today’s market, capital is harder to raise, valuations are stickier than founders expect, and debt plays an outsized role in extending runway, smoothing cash cycles, or creating optionality around the next equity round.
During a recent OG Focus Session, three operators walked through the mechanics, tradeoffs, modeling, and practical decision-making that go into selecting and executing a debt facility. The discussion covered everything from market shifts post-SVB to the fine print inside venture debt term sheets to exactly how to model cost of capital for your board.
This recap synthesizes those insights — designed for COOs, CFOs, Chiefs of Staff, and finance-adjacent leaders who help shape capital strategy.
Understanding the debt landscape: the real spectrum of options
The session began with a 30,000-foot view of the debt universe: global, complex, and far larger than the venture ecosystem most operators live in. Debt markets span hundreds of trillions of dollars, from bonds to private placements to hard-money lenders and everything in between.
Three broad categories emerged:
1. Bonds and private placements
A structured, efficient, institutional market usually reserved for much larger companies. These instruments are typically covenant-light but non-customizable, and borrowers rarely interact directly with lenders.
2. Non-bank lenders
A wide range — venture debt funds, revenue-based financing, equipment lenders, tech-enabled financing platforms, and more. Flexible and customizable, but often more expensive and sometimes predatory.
3. Banks
Everything from project finance to traditional secured lending to recurring-revenue lines. Less flexible but often cheaper, with tighter requirements and a relationship-driven approach.
Two structural distinctions matter in every facility:
- Secured vs. unsecured
- Committed vs. uncommitted
Operators need to understand exactly where their lender sits in the capital stack and what obligations kick in when things get bumpy.
Post-SVB: the market is reshaped but still highly competitive
The collapse of SVB fundamentally shifted venture banking, dispersing talent to new institutions and reshuffling who leads in the market. Banks like Stifel, HSBC, and JPMorgan acquired experienced teams, while First Republic’s team resurfaced at Citizens. Meanwhile, Silicon Valley Bank itself was acquired by First Citizens and remains active.
Two dynamics now define the environment:
1. Demand for debt is higher
With tougher fundraising conditions and valuation pressure, operators increasingly use debt as a less-dilutive bridge to the next round.
2. The bar is higher
Banks and funds are scrutinizing metrics more deeply, underwriting more cautiously, and specializing more tightly around specific business models.
Strong performers still see multiple term sheets. Companies struggling to grow into inflated valuations often turn to private credit — but with far tougher terms.
Choosing debt starts with one question: what are you actually solving for?
Operators often begin with the wrong framing: “What can we get?” The better starting point is: “What do we need?”
Debt structures map closely to use case:
- Runway extension? Venture debt or growth capital loans.
- Seasonal cash swings? Working capital or a revolving line.
- Hardware-as-a-service or deployments? Project finance or asset-backed loans.
- Scaling ARR with predictable retention? Recurring revenue lines tied to MRR.
Each option comes with tradeoffs across flexibility, cost, covenants, and lender involvement.
Banks vs. venture lenders: cost vs. flexibility
Banks offer lower cost of capital, the ability to bundle treasury and payments, and long-term relationship benefits. But they take less risk, require stricter covenants, and offer less flexibility on draw schedules or interest-only periods.
Venture lenders, on the other hand, bring:
- Higher risk tolerance
- Longer interest-only periods
- Flexible use of proceeds
- Faster processes
…but at a materially higher price, both in cash interest and warrant coverage.
How lenders evaluate you: process, diligence, and the things operators forget
Behind every term sheet is a full underwriting engine. On the bank side, teams complete most diligence before sending a term sheet, since reputation matters if they can’t deliver.
The process generally includes:
- Diligence on financials, SaaS metrics, and cap table
- Conversations with investors
- A deep underwriting memo
- Parallel creation of loan documents with legal
- Compliance planning and reporting requirements
Legal can be the biggest drag — and the biggest unforced error — if the operator hands everything off without understanding operational implications.
Operators need to know:
- Which obligations are “standard”
- Which obligations they can realistically comply with
- Which parts legal may over-optimize
A lender may say something is boilerplate — but only the operator knows whether the company can operationalize it.
Relationships matter more than term sheets
A consistent theme throughout the session: lenders and borrowers are long-term partners. The real test isn’t the closing dinner; it’s the moment when performance slips and the operator needs flexibility.
Both sides are evaluating:
- Transparency
- Responsiveness
- Discipline
- Operational maturity
- Willingness to communicate bad news early
In difficult scenarios, the strength of this relationship determines whether exceptions are granted or covenants are enforced.
Modeling debt for the board: the operator’s playbook
One of the most tactical segments of the session was MG’s walkthrough of how operators model debt.
The board only cares about two things:
- How much will this cost the company?
- How much will this cost the shareholders? (warrants, dilution)
The recommended approach:
1. One-pager comparison across lenders
- Commitment amount
- Cost components
- Equity value of warrants
- New runway and cash-out date
2. Full cashflow modeling
Including:
- Draw timing
- Interest-only period
- Amortization period
- End-of-term fees
- Legal fees
- Prepayment penalties
The most important calculation: XIRR, which reveals the true cost of capital — often far higher than the headline rate once fees are included.
3. Warrant modeling
Operators should calculate:
- Value today
- Value at future valuations
- Fully diluted percentage
- True economic impact to shareholders
This allows boards to compare apples to apples, especially between bank and venture options.
What great operators do differently with debt
Several best practices emerged consistently:
1. They get multiple term sheets — but not too many. Enough to understand market, not so many that the team burns cycles unnecessarily.
2. They reference-check lenders. Especially how they behave when things go wrong.
3. They bring in CEOs and board members at the right moment. A well-timed CEO conversation can materially improve terms.
4. They negotiate the right things. Sometimes the most expensive term is buried in the prepayment language or end-of-term fee, not the interest rate itself.
5. They size debt conservatively. Just because lenders offer $75M doesn’t mean the company should take it. Debt must be repaid — operators emphasized avoiding “getting ahead of your skis.”
6. They never celebrate until the money hits the bank. Deals fall apart. Approvals shift. Plans change.
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