Jaime Medina
Yes, they do.
We’re tired of hearing the opposite. The idea that startups can only get bank financing if they’re already break-even or cashflow positive simply doesn’t reflect reality. Let’s unpack where this misconception comes from, and what the truth actually is.
My father used to joke that “banks only give you money when you don’t need it.” And, to some extent, he wasn’t wrong. Banks take limited upside but bear substantial risk, so it makes sense they’re cautious. For more uncertain ventures, equity is typically a better fit. That’s why early-stage financing tends to come from venture capital.
But this isn’t black and white. On day one, Uber had to be funded with equity, no one was going to lend to an unproven concept. Yet once the company had launched successfully in 100 cities, why not finance the next one with some debt? The evolution from “no debt” to “mostly debt” happens gradually, as risk diminishes and visibility increases.
As always, the answer lies in unit economics and cost structure. If a startup is already generating millions in revenue with high margins and recurring income, and it can reduce fixed costs if needed, it’s “default alive.” That’s exactly what sophisticated banks look for. If Uber knew that certain cities became profitable over time, financing new cities with debt isn’t just reasonable, it’s smart.
We need to challenge outdated assumptions. At The Startup CFO, we’ve supported dozens of bank-financed deals over the years, across clients and banking partners, and not a single one has defaulted. Sure, banks won’t fund a startup on day one. But once you hit certain milestones, debt becomes a powerful complement to equity, public funding, or revenue-based financing.
Let’s move past the myths. Bank financing can, and should, play a role in the startup funding mix.
