![]() $4 million today and the remaining $6 million paid in four installments of $1.5 million every six months. However, the investor might offer a deal where the $10 million is a traunch split into five allotments over two years. Providing the full amount upfront is one possibility. For example, a startup company might wish to receive $10 million in financing. A traunch schedule with allotted payments allows venture capitalists to limit risk by parceling their capital contributions into separate releases. ![]() This is particularly true when funding startup companies. ![]() Investors always look to limit investment risks. Each installment is only released based on accomplishing certain milestones or measurable financial goals. However, the VC may divide it up into a traunch of four allotments of $500,000 split up over two years. For example, a VC agrees to fund a promising startup business of $2,000,000 in seed financing. Usually, certain measurable results must be performed and achieved before the next traunch is released. Traunch payments to fund startups let investment banks ensure that the borrower makes proper use of the funds. Investors, banks, and other lenders use a traunch format to limit risk when providing loans or funding to individuals or companies. For example, if the bank agrees to traunch your personal loan, it means it will fund the loan based on allotments. In banking and finance, a traunch refers to splitting or dividing payments. The term traunch originates from the French word tranchewhich means to slice or to cut. It is commonly used in finance and venture capital (VC) when referring to the fundraising rounds used to finance startup companies. Future payments are often subject to achieving certain performance metrics. Usually, for a specific purpose with measured objectives required for future paymentsĪ traunch is one of a series of payments or allotments scheduled to be paid out over a specified period. A Traunch is one portion in a series of allotments or payments.
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