What Traditional Lenders Get Wrong About Biotech

Early-stage biotech companies face a unique set of financial challenges. They’re often pre-revenue, backed by venture capital or grants, and operating on milestone-driven timelines. Yet when it comes to financing critical lab equipment, they’re typically evaluated using the same criteria as businesses with steady cash flow and years of operating history.

It’s a mismatch that leads to friction—applications stalled, terms that don’t fit, or deals that fall through entirely. Not because the science isn’t strong or the team isn’t capable, but because traditional underwriting models aren’t designed for this kind of company.

After more than a decade of working with biotech startups—from seed-stage platforms to scaling therapeutics companies—we’ve seen how this disconnect plays out in practice. And we’ve also seen what it looks like when financing is structured with biotech in mind: approvals are faster, terms make more sense, and teams can stay focused on science rather than paperwork.

This article explores where traditional financing falls short, what lenders often overlook about early-stage biotechs, and what to look for in a partner that understands the realities of building a lab-intensive, milestone-driven business.

The Problem with Traditional Equipment Financing

Traditional lenders approach equipment financing with a specific type of borrower in mind: a business with predictable cash flow, a multi-year operating history, and assets that can be easily valued and recovered. That framework works well for companies in industries like manufacturing, logistics, or construction. But biotech doesn’t fit that mold.

Instead of recurring revenue, early-stage biotech companies are often operating on venture funding or non-dilutive grants. Instead of stable cash flow, they manage burn relative to scientific milestones. And instead of holding easily liquidated assets, much of their value lives in IP, data, and specialized instruments.

When biotech startups apply for financing, they’re often asked for things they simply don’t have:

• Two or more years of profitability
• Audited financial statements
• A strong business credit profile
• Personal guarantees from founders
• Hard collateral with easy resale value

The outcome? Even well-funded teams get declined. Or they’re offered terms that assume high risk—higher interest rates, restrictive covenants, or structures that don’t align with how the business actually operates.

And in many cases, the lender doesn’t understand the equipment either. If it’s not a mainstream asset like an office printer or forklift, it may be undervalued or rejected altogether—even if it’s critical to the startup’s scientific work.

For a company trying to move quickly, this creates unnecessary drag. Time is lost navigating a process that was never designed for companies like theirs.

Biotech-Focused Underwriting: What It Looks Like

The alternative to traditional financing isn’t just more flexible paperwork—it’s a fundamentally different way of evaluating risk and potential.

Biotech-focused underwriting starts with an understanding of how these companies operate. It recognizes that revenue isn’t the main signal of viability, and that equipment is often a means to an R&D milestone—not a productivity tool in the traditional sense. The focus shifts from financial performance to scientific momentum, funding strength, and team credibility.

Instead of fixating on profitability or years in business, biotech-aware underwriters look at:

• Funding history and investor quality: A recent seed or Series A round from credible venture capitalists says more than two years of revenue for a company that isn’t expected to generate sales for another five. Underwriters assess how much capital is on hand, and how it’s earmarked for building out the lab.
• Milestone alignment and runway: Rather than relying on cash flow forecasts, the evaluation considers how far the company is from its next inflection point—whether that’s preclinical data, an IND submission, or early clinical trials. For companies working in drug discovery, diagnostics, or gene therapies, those milestones can mark significant jumps in valuation and future funding opportunities.
• Team and track record: Experienced founders or scientific leads with past successes signal execution strength—even if the current entity is brand new. This matters in a field where talent and vision often drive outcomes more than existing infrastructure.
• Lab readiness and scientific urgency: A company seeking to lease equipment isn’t speculating—they’re building. Understanding the research context behind a request helps underwriters distinguish between essential infrastructure and “nice to have” upgrades.
  

Biotech underwriting also accounts for how equipment fits into broader regulatory or commercialization timelines. The right lab infrastructure can be critical to generating the data needed for regulatory approval, investor updates, or partnerships with larger biopharma companies.

Most importantly, biotech-focused underwriting isn’t about relaxing standards—it’s about applying the right standards. It enables approvals that make sense for how these companies work, without compromising on risk management or due diligence.

What Happens When You Don’t Meet the Criteria

When early-stage biotechs apply for equipment financing and get evaluated through a traditional lens, the outcome is often predictable—and frustrating.

Sometimes it’s a flat-out rejection. The company is too young, doesn’t show revenue, or lacks the business credit history lenders are looking for. Other times, the approval comes with strings attached: personal guarantees from founders, inflated interest rates, or inflexible terms that ignore the realities of a biotech’s development cycle.

Even when financing is approved, it’s not always usable. The lender may undervalue or reject the type of equipment needed. Or they’ll require up-front payments or collateral that make the deal financially impractical.

The result? Companies delay equipment purchases, stretch internal resources, or tap into funding meant for other priorities—burning cash faster or slowing down progress at a time when momentum matters most.

How to Spot the Right Leasing Partner

Not all financing partners are created equal—and in biotech, the difference between a generic lender and one who understands the space can be night and day.

The right leasing partner isn’t just offering capital. They’re aligning with your goals: helping you build the lab you need, on terms that make sense for your stage and strategy. That means looking for signals that they’ve worked with biotech companies before—and that they know how to evaluate your business on its own terms.

Here are a few signs you’re talking to a leasing partner who understands biotech:

• They don’t treat lack of revenue as a deal-breaker:They understand that you’re pre-revenue by design—and evaluate funding, team strength, and scientific progress instead.
• They’ve worked with VC-backed or grant-funded teams before: They know how to read a cap table, how to interpret investor credibility, and how to evaluate use of funds.
• They understand lab workflows and instrumentation needs: If you say you need a specific type of imaging system or analytical instrument, they get why—and they’re comfortable assessing it, not flagging it as too niche.
• They’re not asking for personal guarantees out of the gate: They respect the structure of early-stage companies and don’t default to requiring founder risk as a fallback.
• They offer flexibility, not just approval: Whether it’s staggered lease starts, equipment swaps, or options to upgrade as your workflows evolve, they’re thinking about how you scale—not just how you pay.

On the flip side, there are red flags worth noting. If a lender seems unfamiliar with scientific milestones, struggles to value specialized equipment, or applies rigid criteria designed for a totally different industry, chances are the process won’t get easier down the road.

Why It Matters: Faster Scaling, Smarter Capital Use

For early-stage biotechs, time and capital are everything. Every decision around infrastructure—what to buy, when to lease, how to build your lab—has an impact on your ability to hit milestones and stretch your runway.

Getting financing wrong doesn’t just slow you down. It can pull resources away from hiring, R&D, or validation work. It can force you to make trade-offs that compromise speed, scientific quality, or future fundraising.

But when financing is structured with your business model in mind, the impact is immediate:

• You move faster: No weeks-long application cycles. No back-and-forth to explain how your company works. Just aligned approvals and clear next steps—especially important for companies deep in drug development or preparing for clinical expansion.
• You conserve capital for what matters: Leasing helps you avoid large up-front expenditures and preserve funds for strategic hires, decision-making around R&D priorities, and equity financing needs. For companies focused on eventual IPO or acquisition, reducing dilution early on can make a real difference.
• You build the lab you need, not just the lab you can afford today: When you have access to the right tools—on the right terms—you’re not held back by budget constraints or fundraising cycles. You’re able to make scientific progress at the pace healthcare innovation demands.
• You create optionality without overcommitting: As your workflows evolve, your leasing strategy can too. Equipment can be upgraded, added, or extended as the science (and your business) scales.

Financing may not be the flashiest part of building a biotech company—but when it works the way it should, it becomes a strategic asset. Not a bottleneck.

Conclusion

Traditional lenders aren’t wrong—they’re just not built for biotech. Their models are designed to support businesses with predictable revenue and conventional risk profiles, not startups navigating preclinical milestones, capital raises, or regulatory approval timelines.

But biotech companies need more than access to capital. They need financing partners who understand how this industry works—how biotech funding is structured, how new technologies evolve, and how timelines shift from R&D into commercialization. The right partner can make financing feel less like an obstacle and more like a tool for scaling smartly.

That’s where we come in.

At Excedr, we’ve spent over 14 years helping biotech startups and life science companies build the labs they need to move faster, preserve capital, and stay focused on the science. Whether you're gearing up for early development, expanding into clinicals, or preparing for commercialization, we can help you structure a leasing plan that fits your timeline, your team, and your goals.

Learn more about biotech-focused leasing with Excedr.