Silicon Valley Bank’s Streamlined Closing Form is an exciting new loan feature for startup founders who are going to borrow money to augment their equity capital. SVB is making venture debt documentation a lot easier. What this means is you have an option in the term sheet that you sign with SVB so you can elect to do their Streamlined Form. Once you select that option, you can’t make any changes to the forms, but guess what? It’s free. There’s no documentation fees.
Venture debt loan documentation is expensive
That’s a big deal because documenting a venture debt loan, even a smaller loan, could cost you $10,000 to $20,000. And it’s will take you probably a month to close, depending on how aggressive your law firm is and how aggressive your asks are. Your bill is going to depend on how expensive your law firm is, and how expensive their law firm is, because you’re paying for the lender’s law firm in a lot of their changes. And so having this option of not having to actually go through that process and saving the money is pretty interesting. Now, they also give you the option to just do the regular old process, pass the documents back and forth, get changes from the lawyers, and hash it out. They’re giving you, the customer, the choice.
Consult your startup attorney
So this is a great option, and there are some companies that probably would be willing just to sign the standard form. However, you should be careful. You have to remember, as a founder or a startup that’s borrowing money, you have the most leverage before you sign a term sheet. You’ve usually got two or three offers and everyone’s competing really hard for your business. They want to work with you.
And that’s the moment where you should ask for a copy of the documents. Send them to your lawyer and say, “Hey, can you tell me is there any non-starters in here? Is there anything that we can’t live with? Anything just terrible?” Your attorney will probably come back with a couple things, because the loan documents always start out as favorable to the bank. They’re the lender, they’re the one with power, they have a lot of corporate legal money and teams, and they can really tilt these things in their favor.
And that’s why you have a lawyer. Your lawyer can point out any issues, and before you sign that term sheet, you can work those issues out with your banker. You can have a conversation and get changes to the term sheet.
If you do make changes, you want to make sure that SVB still considers you eligible for the Streamlined Closing Document. SVB will probably work with you if your changes are relatively simple because their mantra is to be startup friendly and founder friendly.
Get the best terms for your startup
That way you can avoid any problematic terms, particularly any that would be detrimental to the company. But you can also get free or very, very inexpensive documentation fees for your venture debt loan.
This SVB program is very friendly to startups, and it’s going to save young companies a significant amount of legal fees. If you have any other questions about startup accounting, startup banking, venture debt, or taxes, please contact us. You can also follow our YouTube channel and our blog for information about accounting, finance, HR, and taxes for startups!
