Borrowing to fund growth was once something European founders were quietly warned against. That caution is fading, and venture debt has become a normal part of how ambitious private companies pay for their next stage.

European technology companies took on a record of around $5.6bn of venture debt in 2025, and at the recent peak this kind of lending made up close to an eighth of all the money invested into European startups, according to State of European Tech. The typical loan has grown larger too, as more established companies use it in place of, or alongside, a fresh round of equity.

Part of the reason is simply the cost of the alternative. With valuations still soft in much of the market, giving away a slice of the company to raise cash looks expensive, and a loan can work out cheaper once the lost ownership is counted. The structure itself is uncomplicated. A loan of around six years, often with an early spell paying interest only, secured against the business rather than the founder in person, at a rate somewhere between 10% and 13%.

What has changed most is how these lenders make up their minds. The better ones now look more closely at a company's own billing and accounting records, watching how reliably customers stay and spend. That approach suits software and subscription businesses with steady, repeat income, which is where most of the lending is going.

However, this route may not be for everyone. A loan must be serviced, and a business without a clear path to paying it back should think carefully before taking one on. We asked in September 2024 whether it was a good time to issue private debt. For the right company in 2026, with real growth and cash flows that can carry the cost, the answer is more often yes.

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