how evergreen funding works
evergreen funding takes its name from coniferous evergreen trees which keep their leaves and stay green throughout the year similarly evergreen funding provides capital throughout the seasons of a company s development in a normal debt financing arrangement company issued bonds or debentures have a maturity date and require principal repayment at some future point in time an evergreen funding arrangement however allows a business to renew its debt periodically repeatedly pushing back the maturity date so that the time until maturity remains relatively constant while the arrangement is in place in the case of venture capital dollars the financing is done by selling ownership stakes in the venture but the infusions of capital are spread out over set periods this approach is used to avoid pushing a company to grow too fast evergreen funding of this nature assures entrepreneurs that the money is there but by limiting the pace of capital infusions it prevents them from growing too rapidly with evergreen funding capital is provided to the management of the company either on a schedule or upon request by the investment team evergreen funding has also been used to describe a revolving credit arrangement in which the borrower periodically renews the debt financing rather than having the debt reach maturity in this sense lines of credit and overdrafts are types of evergreen funding as the borrower applies for it once and then is not required to reapply to access the credit at a later date evergreen funding is distinct from an evergreen fund which is an investment fund that has an indefinite life meaning that investors can come and go throughout the life of the fund evergreen funding for cautious growththe main arguments for evergreen funding for new ventures are the cautionary tales of startups that grew too fast and quickly outpaced their business model to the point that a profitable business on a small scale became a ruined venture on a larger one ways of business funding are multiplying but the traditional up front variety of venture capital remains popular reasons include founders and investors being eager to scale up as fast as possible to fill any market voids in their sector before other startups can emerge to compete also venture capitalists want as much of the growth as possible to occur when the company is in the private market so that the value of a potential initial public offering ipo pays the maximum return 