Question 1

What is a non-recourse loan against private company stock?

Accepted Answer

A non-recourse loan means the lender's claim is limited strictly to the pledged shares. If something goes wrong, your personal assets (home, savings, other investments) are completely protected. The worst case scenario is you lose the pledged shares, nothing more. This is fundamentally different from a margin loan or personal loan where the lender can pursue your entire balance sheet.

Question 2

What is PIK (Payment-In-Kind) interest?

Accepted Answer

PIK means interest accrues and is added to your principal balance rather than requiring monthly cash payments. Instead of writing monthly checks, the interest compounds and you pay everything at the end from your liquidity proceeds (IPO, M&A, or tender offer). About 90% of borrowers use full PIK because it eliminates cash flow pressure while waiting for a liquidity event.

Question 3

Does borrowing against stock preserve QSBS eligibility?

Accepted Answer

Yes, properly structured debt is not a 'disposition' of shares, meaning it generally does not reset the clock or disqualify QSBS (Qualified Small Business Stock) status. By borrowing against your shares instead of selling them, you can maintain your holding period toward the 5-year QSBS requirement and preserve eligibility for the federal tax exclusion (up to $10M or 10x your basis).

Question 4

Why is 9-10% interest cheaper than selling shares?

Accepted Answer

Compare it to your tax rate, not to mortgage rates. If you're a California resident with long-term capital gains, selling triggers approximately 37% in immediate taxes (20% federal + 13.3% state + 3.8% NIIT). At 9% annually, you'd need to hold the loan for over 4-5 years before the total interest equals what you'd have paid in taxes. Most liquidity events happen in 2-3 years, well before that break-even point. Plus, you keep 100% ownership and all future appreciation.

Question 5

Why only 10% LTV when other lenders offer 25-35%?

Accepted Answer

This is the 'Margin of Safety' that makes the structure work. By lending at 10% LTV, the loan remains safe even if your company's valuation drops 50% or more. At 10% LTV, a $10M position dropping 50% to $5M still covers a $1M facility 5x over. Conservative sizing means no margin calls, no forced liquidations, and a structure that survives stress.

Question 6

What happens if my company fails or goes bankrupt?

Accepted Answer

This is where non-recourse protection matters most. If the company fails and your shares become worthless, the lender can only claim those specific pledged shares. You have no personal obligation to repay from other assets. You'd have already used the facility funds, and you don't owe anything more. This is fundamentally different from a margin loan where the lender could pursue you personally for the shortfall.

Question 7

How is this different from a margin loan?

Accepted Answer

Margin loans are designed for liquid, publicly traded securities and carry different risks: full recourse (the bank can pursue your personal assets), daily mark-to-market pricing, and margin calls requiring immediate additional collateral. Bedrock facilities are non-recourse (only pledged shares at risk), event-driven valuation (no daily marks), and self-liquidating (repays at exit events like IPO or M&A).

Question 8

What companies does Bedrock lend against?

Accepted Answer

Bedrock lends against scaled, late-stage private technology companies with meaningful revenue, proven unit economics, institutional investors with strong governance, clear paths to liquidity (IPO, M&A, or recurring tender programs), and active secondary market activity. Early-stage startups, highly speculative names, or companies with unclear governance are not eligible.

Question 9

What is the ideal candidate for a pre-exit credit facility?

Accepted Answer

The structure typically works best for someone who holds $5M+ in vested equity at a mature, late-stage private company, is in a high-tax state (CA, NY, NJ) with combined rates above 35%, expects a liquidity event within 2-4 years, needs modest liquidity (under 10% of position value), values keeping full ownership and future appreciation, and has QSBS qualification they want to preserve.

Question 10

How long does the process take?

Accepted Answer

A typical engagement takes 10-15 business days: Week 1 covers initial conversation, position verification, and preliminary terms; Week 2 involves underwriting, legal review, and term sheet delivery; Week 3 completes documentation and funding. Complex cap tables or unusual structures may take longer.

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