What Is a Startup Equity-Linked Loan?
A Startup Equity-Linked Loan is a hybrid funding model where a portion of the loan is backed by equity in the startup. Unlike traditional loans, repayment flexibility is provided in exchange for minority equity stake or convertible debt.
It’s ideal for early-stage startups who need working capital but want to delay or avoid large EMI commitments.
Key Features of Equity-Linked Loans
| Feature | Description |
|---|---|
| Loan Amount | ₹10 lakhs to ₹5 crores (based on valuation) |
| Equity Dilution | 2% to 10% typically |
| Repayment | Deferred or milestone-based |
| Interest Rate | Lower than unsecured loans |
| Collateral | Usually not required |
| Tenure | 1–5 years |
| Investor Type | VCs, angels, or institutional lenders |
Why Choose an Equity-Linked Loan?
🧠 Low EMI Pressure – Less strain on early-stage cash flows
🔓 No Need for Physical Collateral
📈 Access to Strategic Investors – Not just lenders, but potential mentors
🔁 Convertible Options – Debt can convert into equity at next funding round
⏳ Time Flexibility – Repay when business hits growth milestones
Risks to Keep in Mind
⚠️ Equity Dilution – You give away a portion of company ownership
📊 Valuation Pressure – Must have a clean cap table and realistic valuation
👀 Investor Oversight – Some lenders may want board rights or performance reports
🔁 Conversion Clauses – Read the fine print on future equity conversion
Real-Life Example
A food delivery startup raised ₹25 lakhs via a Vizzve-partnered equity-linked loan. They gave away 4% equity and started repayments only after Series A funding closed. Zero EMIs for 12 months.
Eligibility Criteria
Registered Private Limited Company or LLP
Minimum 6 months operational history
Scalable business model with growth potential
Pitch deck, financial projections, and KYC
Founder commitment (skin in the game)
Why Vizzve Finance for Equity-Linked Loans?
✅ We match you with the right investors/lenders for hybrid models
📈 Help structure founder-friendly terms
🧠 Offer advisory on pitching, valuation, and equity strategy
📲 Fast-tracked due diligence with minimal documentation
FAQs
Q1: Do I lose ownership with equity-linked loans?
You give away only a small stake—often 2–5%—based on funding needs.
Q2: Can I choose not to convert debt to equity?
Some models allow fixed repayment instead of equity conversion—ask for structured terms.
Q3: What’s the difference between this and VC funding?
This is a loan-first model with optional equity; VC is equity-only.
Published on : 24th July
Published by : SMITA
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