DigitalOcean raises $100M in debt as it scales toward revenue of $300M

So 'going into default' just means that you've triggered a default clause in the contract, usually when you fail your side of the bargain.

So it's not necessary collateral you have to give up when you go into default. It could be, but it's going to be specific to that particular loan contract. It could be collateral, or extra fines, or you agree to sell off your assets and give a percentage back to the lending bank.

I don't know the standard details in these types of clauses that are used in big loans like this, but the vast majority of the time the bank is going to want to sit down and send in advisers and consultants and that sort of thing to help bring your company back into profitability.

So when you go into default the first thing that happens is that you are going to lose a lot of autonomy as the bank is going to want to start to take a more active role in managing the company so that they can recover their money.

Look at it this way:

If a bank makes a 10,000 dollar loan to you and you fail to pay it back... That's your problem.

However if a bank makes a 100,000,000 dollar loan and you fail to pay it back... That's THEIR problem.

This points to the major difference in consumer debt (credit cards, mortgages, student loans, car loans) vs business debt.

With business debt there is a shared liability. It's a business arrangement in which both parties.. the lender and the borrower face significant risks. So when 'shit hits the fan' they will try to work together to figure something out. They can't depend on the government to step in and try to force the other party to assume all the liability.

This is why for large businesses it's kinda silly NOT to be in debt as long as risk is carefully managed. As long as they make more money from the capital investment then the interest rates they need to pay on that laon then it's a win-win situation.

Consumer debt is vastly different. When you get a personal loan or other type of consumer loan then you have almost 100% of the liability. The banks have arranged the loan details, monitor activity via credit reporting agencies, and influenced the laws regarding personal debt so they face almost no risk.

The goods you buy with the loan don't increase in value (only common exception is home mortgages)... instead they depreciate. You are going into debt to buy future landfill.

There is very little shared liability. Because of the lack of risk on the side of the lenders then consumer debt is much more predatory.. much more dangerous to the borrower.

When it comes to student loans there is NO shared liability. You assume 100% of the risk. The banks that lend the money usually make MORE money the worse you are at paying them back.

So you can't really apply your personal experience with credit cards and car loans try to apply it to business logic.

Getting funding as a startup is another. If you are alone in your vertical nobody wants to talk to you. If you have competition, well, then you must be doing something interesting.