Venture debt in India: how it works and who lends

Every equity round costs you a slice of the company. Venture debt is the other lever: money you repay, so you keep more of what you own. In India it has moved from a niche product to a regular part of how startups fund themselves.

According to Business Standard's report on Stride Ventures' Global Private Debt Report 2026, Indian startups raised about $1.3 billion in venture debt in 2025. That's close to 9% of annual VC capital deployed, up from around 2% to 3% in the past.

Before you take it, know what it is, who lends it and what it will ask of your cash flow. It sits beside the other routes in how capital moves in India in 2026.

What is venture debt and how does it work in India?

Venture debt is a medium-term loan for startups that have already raised equity from seed or venture investors. The lender prices the risk off the equity you've raised and your growth outlook, not off property or machines. Tenors usually run 18 to 36 months, with fixed interest and often a small equity kicker.

That's how Nishith Desai Associates describes it in its venture debt explainer: a bridge between equity and traditional debt. A bank loan is built around collateral and cash flow. Venture debt is built around the fact that a venture investor has already backed you.

The same explainer notes that ordinary business loans often run 6 to 7 years. Venture debt is much shorter, so repayment starts while you're still growing and often still burning cash.

Who lends venture debt in India?

Three kinds of lender give venture debt in India: dedicated venture debt funds, NBFCs and banks. They use different legal structures, and that changes the paperwork you'll sign, but the commercial idea is the same: a loan sized and priced off the equity you've already raised.

• Venture debt funds: usually registered with SEBI as alternative investment funds. They often lend by subscribing to non-convertible debentures your company issues, with a debenture trustee holding the security.
• NBFCs: non-bank lenders registered with the RBI. They usually lend through a term loan agreement.
• Banks: less common for young startups, because they want collateral. The government's credit guarantee scheme for startups can cover part of a lender's loss, including on venture debt.

Foreign money is harder. The Nishith Desai explainer notes that if the loan comes from abroad as an external commercial borrowing, end-use limits and a cap on total cost make the route commercially unviable for most venture debt. So most deals stay onshore.

How big is the venture debt market in India?

Stride Ventures' Global Private Debt Report 2026 puts Indian venture debt at about $1.3 billion across 187 deals in 2025, against $1.23 billion in 2024. That's a venture debt lender's own count, so read it as one named source, not an official total. No regulator publishes a venture debt series.

Reports of the same study differ slightly. YourStory's coverage gives $1.38 billion for 2025, up 12%. Both agree on 187 deals. Here's what else the report shows, as YourStory and Business Standard carried it:

Measure (Stride Ventures, 2025)	Figure
Venture debt deployed	About $1.3 billion
Deals	187
Average ticket	$3.5 million
Share of deals at Series A and B	60%
Fintech, the top sector	$600 million

Delhi NCR and Bengaluru together took nearly three-fourths of deployment. Above venture debt sits growth credit for larger companies: $1.68 billion across 32 deals, averaging $52 million each.

Trackers that count only disclosed rounds see a smaller slice. Entrackr's 2025 report, using TheKredible data, recorded $984.36 million of startup debt funding across 52 transactions. Different scope, different number. Always name the source when you quote one.

How is a venture debt deal structured?

Most Indian venture debt deals are a fixed-interest loan of 18 to 36 months, repaid monthly or quarterly after an agreed interest moratorium, secured on the company's current and future assets, and topped with an equity kicker. The details below are the ones to read most closely in a term sheet.

• Tenor: 18 to 36 months, per the Nishith Desai explainer.
• Interest: fixed, and slightly higher than a bank or NBFC loan, because the risk is higher.
• Warrants or another equity kicker: a right to buy shares later, usually at an agreed price. This is the lender's upside, and it dilutes you a little.
• Security: usually hypothecation of current and future assets, including IP and brand. A holding company may be asked for a corporate guarantee. Personal guarantees from promoters are rare.
• Covenants: positive ones, such as information rights, and negative ones, such as limits on new loans or new charges on assets.
• Board: lenders don't usually take a seat, except after an event of default.

Ask exactly how many shares the warrants cover, at what price and until when. Then work out the dilution yourself before you compare the offer with an equity round.

Venture debt doesn't replace your next equity round. It buys you time to raise it on better terms.

When do founders use venture debt?

Founders use venture debt to stretch the runway from one equity round, so the next round happens at a higher valuation with less dilution. It works best soon after a round, when cash is high and a lender can see who backed you. It works worst as a rescue loan.

The Stride report says debt is moving beyond runway and working capital into expansion, acquisitions and capital structure planning. YourStory reports the study found more than 70% of founders expect their use of private debt to rise over the next two years.

The risk is plain. Repayments start while you're burning cash. If your next round slips, the loan doesn't wait. Before you sign, model the repayment schedule against your burn, the way an investor would in the burn rate and runway questions investors ask.

What do venture debt lenders check before they lend?

Venture debt lenders check who your equity investors are, how much runway you have and how likely your next round is. Their diligence is usually lighter than an equity investor's, because they take comfort from the diligence your venture investors already did. That makes your last round your strongest document.

Expect questions about your latest financials, your monthly burn and your plan for the next round. Lenders will also read your cap table, existing charges on assets and any earlier loans, because negative covenants depend on them. A messy register slows everything; fixing the cap table before you raise helps here too.

This is an explainer, not advice. Loan terms differ widely between lenders, and the right structure depends on your numbers. Talk to a chartered accountant or a lawyer before you sign, and see where debt sits against equity at each stage in startup funding in India by stage.

Questions

What is venture debt in India?

Venture debt is a medium-term loan for startups that have already raised equity from seed or venture investors. The lender looks at the equity raised and the growth outlook rather than at hard assets. Tenors usually run 18 to 36 months, and many deals add an equity kicker such as warrants.

Who gives venture debt in India?

Three kinds of lender. Venture debt funds, usually registered with SEBI as alternative investment funds, often lend by subscribing to debentures. NBFCs registered with the RBI usually lend as term loans. Banks lend too, and the government's credit scheme for startups can cover part of their risk.

How big is the venture debt market in India?

Stride Ventures' Global Private Debt Report 2026 puts Indian venture debt at about $1.3 billion across 187 deals in 2025, against $1.23 billion in 2024. YourStory's reading of the same report gives $1.38 billion. The report says venture debt is now close to 9% of annual VC capital deployed.

Is venture debt cheaper than equity?

It costs less ownership, not necessarily less cash. You pay fixed interest from early on and give lenders a small equity kicker, while equity costs you a share of the company for good. Compare both on your own numbers, and ask a chartered accountant to model the repayment against your runway.

Sources: Business Standard, Indian startups raise $1.3 billion in venture debt in 2025: Report (Stride Ventures, Global Private Debt Report 2026), Apr 2026 · YourStory, Venture debt registers 12% growth in 2025, says report, 8 Apr 2026 · Nishith Desai Associates, Onshore Funding Routes: Venture Debt, 10 Nov 2020 · Entrackr, Indian startup funding drops 10% to $13 Bn in 2025 (TheKredible data), 30 Dec 2025

For more on how startup funding works in India, read the MyStartupValley blog or visit mystartupvalley.com.