startup debt Archives - Launchopedia

Unfortunately, startup debt can arise from numerous sources, each potentially lethal. Many forms of debt are obvious, others are not, and it’s those that are not which place the entrepreneur in the most risk of impacting their funding potential.

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Entrepreneur

A person who organizes and operates a business or businesses, taking on greater than normal financial risks to do so. Entrepreneurs are the founders of startups and are the people angel investors support.⁷

Funding

This term is used synonymously with the words “financing” and “capital.” It refers to the amount of money that is needed for a business endeavor. For example, a new business owner may seek a certain amount of funding for their startup company. This “raised” capital can be used to launch their endeavor as well as to sustain their company until monetary profit can be generated.⁴

Startup

A startup is a new business venture / enterprise in its initial or early stages of development. These stages include the concept, seed, early, growth and mezzanine stages.⁶

Risk

The probability that part or all of an original investment will be lost or that investment returns will be lower than anticipated. Numerous factors may impact these potential investment and return losses, including but not limited to demand risk, economic risk, environmental risk, funding risk, legislative risk, maintenance risk, operational risk, procurement risk, technology risk and timing risk.⁶

Debt

Any obligation by one person to pay another. May be a primary (direct) obligation as in a Note, or a secondary (contingent) obligation as in a guaranty.³
This is an amount of money that a borrower owes to an individual, investor, or lending institution. In the finance world, the word “debt” is often associated with interest payments. For example, when an individual has a credit card limit of $5,000, the lender, usually a bank, is willing to lend the credit card holder $5,000 of credit. If the lender uses $500 of that total amount, they are now considered to be in $500 debt until the total amount is paid. Partial payment of an owed amount always encompasses interest.⁴

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