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Why do Banks & Venture Lenders Want to Read Your Startup's SAFE Note & Convertible Debt Documents?

Vanessa Kruze, CPA, is a leading expert in startup taxes and tax compliance. Her team at Kruze Consulting has filed thousands of tax returns for companies that have raised billions in VC funding, and her work has been diligenced by leading VCs, attorneys, and M&A teams at the largest technology companies.

Vanessa Kruze, a highly-experienced CPA, brings valuable tax expertise to startups, drawing from her rich background at Deloitte Tax and as a financial controller for a $20 million startup. As the leader of Kruze Consulting, recognized multiple times in the Inc 5000 list, she specializes in navigating the complex tax landscape for startups. Her firm is known for delivering precise and strategic tax solutions, delivering tax credits utilizing advanced tools to ensure compliance and optimize tax benefits for startups throughout the United States.

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Banks & Venture Lenders want to read the fine print on your Startup’s SAFE Note & Convertible Debt Documents because if the investment is characterized as Unsecured Debt then it impacts the Lender’s underwriting of a venture debt loan.

The reason why Lenders want to know if the SAFE is debt or not is that when a Lender does not have a lien on Intellectual Property, they have to share the proceeds of the IP with unsecured creditors. This is a doomsday scenario meaning the company was not able to raise money and the Lenders are selling the assets for capital recovery. But it’s something Banks & Venture Debt firms will take into consideration when underwriting the deal.

There is no point in withholding this document in the process because the Lenders need it for their underwriting and the SAFE Note or Convertible Debt is already in place. No point in hiding the ball. :)

Kruze Consulting is a leading accounting firm working with seed and venture funded Delaware C-Corps. Funded startups choose Kruze Consulting’s team of CPAs, bookkeepers, CFOs, former IRS tax auditors, and venture experts. In addition to running the books, Kruze does tax, finance, and HR. Contact Kruze today!

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