FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



Commission file number 0-29591

Venture Lending & Leasing III, Inc.

(Exact Name of Registrant as specified in its charter)



|Maryland                                                       | 77-0534084                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)



2010 North First Street, Suite 310, San Jose, CA 95131

(Address of principal executive offices) 	 (Zip Code)

(408) 436-8577

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant has (i) filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days.

Yes ÖNo __

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

|Class                        | Outstanding as of May 2, 2001
|---------------------------- | -----------------------------
|Common Stock, $.001par value | 100,000                      











VENTURE LENDING & LEASING III, INC.

INDEX

|PART I -- FINANCIAL INFORMATION                                                                                                         | 
|--------------------------------------------------------------------------------------------------------------------------------------- | 
|Item 1.		Financial Statements                                                                                                           | 
|Statement of Financial Position (Unaudited) As of March 31, 2002 and December 31, 2001                                                  | 
|Statement of Operations (Unaudited) For the Three Months Ended March 31, 2002 and 2001                                                  | 
|Statement of Changes in Shareholder's Equity (Unaudited) For the Year ended December 31, 2001 and the Three Months Ended March 31, 2002 | 
|Statement of Cash Flows (Unaudited) For the Three Months Ended March 31, 2002 and 2001                                                  | 
|Notes to Financial Statements                                                                                                           | 
|Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations                                           | 
|Item 3. Quantitative & Qualitative Disclosures About Market Risk                                                                        | 
|PART II -- OTHER INFORMATION                                                                                                            | 
|Item 1. 	Legal Proceedings                                                                                                              | 
|Item 2. 	Changes in Securities and Use of Proceeds                                                                                      | 
|Item 3. 	Defaults upon Senior Securities                                                                                                | 
|Item 4.	 Submission of Matters to a Vote of Security Holders                                                                            | 
|Item 5. Other Information                                                                                                               | 
|Item 6.	 Exhibits                                                                                                                       | 
|SIGNATURES                                                                                                                              | 













VENTURE LENDING & LEASING III, INC.

STATEMENT OF FINANCIAL POSITION (UNAUDITED)

AS OF MARCH 31, 2002 AND DECEMBER 31, 2001





|                                                           |  | March 31, 2002       |  | December 31, 2001    
|---------------------------------------------------------- |  | -------------------- |  | ---------------------
|                                                           |  | -------------------- |  | ---------------------
|ASSETS                                                     |  |                      |  |                      
|Loans at estimated fair value                              |  |                      |  |                      
|(Cost of $197,833,991 and $207,446,465)                    |  | $ 193,133,964        |  | $ 204,243,113        
|Cash and cash equivalents                                  |  | 26,737,403           |  | 20,175,836           
|Other assets                                               |  | 1,821,927            |  | 1,525,453            
|                                                           |  | -------------------- |  | ---------------------
|Total assets                                               |  | 221,693,294          |  | 225,944,402          
|                                                           |  | =============        |  | ==============       
|LIABILITIES AND SHAREHOLDER'S EQUITY                       |  |                      |  |                      
|Liabilities:                                               |  |                      |  |                      
|Bank loans                                                 |  | 75,625,611           |  | 80,000,000           
|Accrued management fees                                    |  | 2,230,767            |  | 2,280,340            
|Accounts payable and other accrued liabilities             |  | 2,043,607            |  | 3,340,710            
|                                                           |  | -------------------- |  | ---------------------
|Total liabilities                                          |  | 79,899,985           |  | 85,621,050           
|                                                           |  | -------------------- |  | ---------------------
|Shareholder's equity:                                      |  |                      |  |                      
|Common stock: $0.001 par value, 200,000 shares authorized; |  |                     
|Issued and outstanding - 100,000 shares                    |  | 100                  |  | 100                  
|Capital in excess of par value                             |  | 155,004,400          |  | 155,004,400          
|Distributions                                              |  | (7,413,109)          |  | (6,864,039)          
|Accumulated deficit                                        |  | (5,798,082)          |  | (7,817,109)          
|                                                           |  | -------------------- |  | ---------------------
|Total shareholder's equity                                 |  | 141,793,309          |  | 140,323,352          
|                                                           |  | -------------------- |  | ---------------------
|Total liabilities and shareholder's equity                 |  | $ 221,693,294        |  | $ 225,944,402        
|                                                           |  | =============        |  | ==============       











The accompanying notes are an integral part of these statements



VENTURE LENDING & LEASING III, INC.

STATEMENT OF OPERATIONS (UNAUDITED)

|                                                           | For the Three Months Ended March 31, 2002 | For the Three Months Ended March 31, 2001
|---------------------------------------------------------- | ----------------------------------------- | -----------------------------------------
|                                                           | -----------------                         | -----------------                        
|INVESTMENT INCOME:                                         |                                           |                                          
|Interest on loans                                          | $ 7,346,451                               | $ 3,011,831                              
|Interest on short-term investments                         | 508,494                                   | 252,641                                  
|                                                           | -----------------                         | -----------------                        
|Total investment income                                    | 7,854,945                                 | 3,264,472                                
|                                                           | -----------------                         | -----------------                        
|EXPENSES:                                                  |                                           |                                          
|Management fees                                            | 2,230,767                                 | 2,079,057                                
|Interest expense                                           | 953,221                                   | 738,834                                  
|Other operating expenses                                   | 727,584                                   | 294,551                                  
|                                                           | -----------------                         | -----------------                        
|Total expenses                                             | 3,911,572                                 | 3,112,442                                
|                                                           | -----------------                         | -----------------                        
|Net investment income                                      | 3,943,373                                 | 152,030                                  
|                                                           | -----------------                         | -----------------                        
|Net change in unrealized loss from investment transactions | (875,470)                                 | (3,351,851)                              
|Net realized loss from investment transactions             | (1,048,876)                               | -                                        
|                                                           | -----------------                         | -----------------                        
|Net income (loss)                                          | $ 2,019,027                               | $ (3,199,821)                            
|                                                           | ===========                               | ===========                              
|Net income (loss) per share                                | $ 20.19                                   | $ (32.00)                                
|                                                           | ===========                               | ===========                              
|Weighted average shares outstanding                        | 100,000                                   | 100,000                                  























The accompanying notes are an integral part of these statements





VENTURE LENDING & LEASING III, INC.

STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001







|                           |               |               | Capital in       |                |                |               
|-------------------------- | ------------- | ------------- | ---------------- | -------------- | -------------- | --------------
|                           | Common        | Stock         | Excess of        |                | Accumulated    |               
|                           | Shares        | Par Value     | Par Value        | Distributions  | deficit        | Total         
|                           | =========     | =========     | ==========       | =========      | =========      | =========     
|BALANCE, December 31, 2000 | $ 100,000     | $ 100         | $ 51,022,400     | $ (2,396,740)  | $ (3,583,978)  | $ 45,041,782  
|                           |               |               |                  |                |                |               
|Contribution of capital    | -             | -             | 103,982,000      | -              | -              | 103,982,000   
|Distributions              | -             | -             | -                | (4,467,299)    | -              | (4,467,299)   
|Net loss                   | -             | -             | -                | -              | (4,233,131)    | (4,233,131)   
|                           | ------------- | ------------- | ---------------- | -------------- | -------------- | --------------
|BALANCE, December 31, 2001 | $ 100,000     | $ 100         | $ 155,004,400    | $ (6,864,039)  | $ (7,817,109)  | $ 140,323,352 
|                           | ------------- | ------------- | ---------------- | -------------- | -------------- | --------------
|Distributions              |               |               |                  | $ (549,070)    |                | (549,070)     
|Net income                 |               |               |                  |                | $ 2,019,027    | 2,019,027     
|                           | ------------- | ------------- | ---------------- | -------------- | -------------- | --------------
|BALANCE, March 31, 2002    | $ 100,000     | $ 100         | $ 155,004,400    | $ (7,413,109)  | $ (5,798,082)  | $ 141,793,309 
|                           | =========     | =========     | ==========       | =========      | =========      | =========     







































The accompanying notes are an integral part of these statements





VENTURE LENDING & LEASING III, INC.

STATEMENT OF CASH FLOWS (UNAUDITED)

|                                                                                              | For the Three Months Ended 3/31/02 | For the Three Months Ended 3/31/01
|--------------------------------------------------------------------------------------------- | ---------------------------------- | ----------------------------------
|                                                                                              | -----------------------            | ----------------------            
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                         |                                    |                                   
|Net income (loss)                                                                             | $ 2,019,027                        | $ (3,199,821)                     
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:      |                                    |                                   
|Net realized loss from investment transactions                                                | 1,048,876                          | -                                 
|Net change in unrealized loss from investment transactions                                    | 875,470                            | 3,351,851                         
|Amortization of deferred assets (net of additions)                                            | 94,738                             | (521)                             
|Increase in other assets                                                                      | (391,211)                          | (93,011)                          
|Net increase (decrease) in accounts payable, accrued liabilities, and accrued management fees | (725,472)                          | 499,878                           
|                                                                                              | -----------------------            | ----------------------            
|Net cash provided by operating activities                                                     | 2,921,428                          | 558,376                           
|                                                                                              | -----------------------            | ----------------------            
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                         |                                    |                                   
|Acquisition of loans                                                                          | (25,423,471)                       | (49,292,793)                      
|Principal payments on loans                                                                   | 33,987,069                         | 9,134,133                         
|Acquisition of securities                                                                     | (549,070)                          | (1,415,751)                       
|                                                                                              | -----------------------            | ----------------------            
|Net cash provided by (used in) investing activities                                           | 8,014,528                          | (41,574,411)                      
|                                                                                              | -----------------------            | ----------------------            
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                         |                                    |                                   
|Contribution of capital                                                                       | -                                  | 36,982,000                        
|Loan from bank                                                                                | 1,983,865                          | 25,000,000                        
|Repayment of bank loans                                                                       | (6,358,254)                        | (18,636,130)                      
|                                                                                              | -----------------------            | ----------------------            
|Net cash provided by (used in) financing activities                                           | (4,374,389)                        | 43,345,870                        
|                                                                                              | -----------------------            | ----------------------            
|Net increase in cash and cash equivalents                                                     | 6,561,567                          | 2,329,835                         
|CASH AND CASH EQUIVALENTS:                                                                    |                                    |                                   
|Beginning of period                                                                           | 20,175,836                         | 9,720,784                         
|                                                                                              | -----------------------            | ----------------------            
|End of period                                                                                 | $ 26,737,403                       | $ 12,050,619                      
|                                                                                              | ===============                    | ==============                    
|CASH PAID DURING THE PERIOD FOR:                                                              |                                    |                                   
|Interest                                                                                      | $ 1,026,568                        | $ 875,603                         
|NON-CASH ACTIVITIES:                                                                          |                                    |                                   
|Distributions of warrants and stock to shareholder                                            | $ 549,070                          | $ 1,415,751                       

The accompanying notes are an integral part of these statements.

VENTURE LENDING & LEASING III, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2002



1. ORGANIZATION AND OPERATIONS OF THE FUND
2. SUMMARY OF INVESTMENTS:
3. EARNINGS PER SHARE
4. Financial Highlights

Accounting principles generally accepted in the United States require disclosure of financial highlights of the Fund for the periods presented, the three months ended March 31, 2002 and 2001. The total rate of return is defined as the return based on the change in value during the period of a theoretical investment made at the beginning of the period. The total rate of return assumes a constant rate of return for the Fund during the period reported and weights each cash flow by the amount of time held in the Fund. This required methodology differs from an internal rate of return.

Net investment income is inclusive of all investment income, net of expenses and does not include realized and unrealized losses. The ratios of expenses and net investment income to average net assets calculated below are annualized and are computed based upon the aggregate weighted average net assets of the Fund for the periods presented.

Beginning and ending net asset values are based on the beginning and ending number of shares outstanding. Other per share information is calculated based upon the aggregate weighted average net assets of the Fund for the periods presented.

The following per share data and ratios have been derived from the information provided in the financial statements:

|                                     | 3 Months Ended
|------------------------------------ | --------------
|                                     |               
|                                     | 3/31/02       
|                                     | ------------  
|Total Return                         | 5.8%          
|                                     |               
|Net Asset Value, Beginning of Period | $1,403.23     
|                                     | ------------  
|Investment Income (net)              | 39.43         
|Realized Gain & Unrealized Gain      | (19.24)       
|                                     | ------------  
|Total Income (Loss)                  | 20.19         
|Contributions                        | 0.00          
|Distributions                        | (5.49)        
|                                     | ------------  
|Net Asset Value, End of period       | $1,417.93     
|                                     | ========      
|                                     |               
|Ratios to Average Net Assets:        |               
|                                     |               
|Expenses*                            | 11%           
|Net Investment Income*               | 11%           
|                                     |               
|*Annualized                          |               

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations



General

Venture Lending & Leasing III, Inc. ("Fund") is a closed-end, non-diversified management investment company electing status as a business development company under the Investment Company Act of 1940 ("1940 Act"). The Fund is 100% owned by Venture Lending & Leasing III, LLC ("Company"). The Fund's investment objective is to achieve a high total return. The Fund provides asset-based financing to carefully selected venture capital-backed companies, in the form of secured loans. The Fund generally receives warrants to acquire equity securities in connection with its portfolio investments. The Fund generally distributes these warrants to its shareholder upon receipt.

The Fund's shares of Common Stock, $.001 par value are sold to its shareholder under a stock purchase agreement. The Fund has issued 100,000 of the 200,000 shares that were authorized. The Fund's shareholder may make additional capital contributions to the Fund.

In addition to the historical information contained herein, this Quarterly Report contains certain forward-looking statements. The reader of this Quarterly Report should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Fund's actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, loan losses, expenses, rates charged on loans and earned on securities investments and competition effects as well as other factors. This entire Quarterly Report should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Fund's business.

Critical Accounting policies

We identified the most critical accounting principles upon which our financial statements depend. We determined the critical accounting principles by considering accounting policies that involve the most complex or subjective decisions or assessments. We identified our only critical accounting policy to be that related to the valuation of loans.

Loans are held at fair value as determined by management, in accordance with the valuation methods described in the valuation of loans and investments section of footnote 2 (Summary of Significant Accounting Policies). Critical factors in determining the fair value of a loan include payment history, collateral position, financial strength of borrower, prospects for future equity rounds, likelihood of sale or acquisition of the borrower, and length of expected holding period of the loan. The actual value of the loans may differ from management's estimates, which would affect net income as well as assets.



#### Results of Operations For the Three Months ended March 31, 2002 and 2001

Total investment income for the three months ending March 31, 2002 and 2001 was $7.8 million and $3.3 million respectively, of which $7.3 million and $3.0 million respectively, consisted of interest on venture loans outstanding during the period. The remaining income consisted of payment of late fees from customers, income from expiration of commitments for which the Fund had received a commitment fee, and interest on the temporary investment of cash. The cash is held pending investment in venture loans. The increase in investment income is due primarily to the increase in outstanding loans from $114.1 million in March 2001 to $193.1 million in March 2002.

Total expenses were $3.9 million and $3.1 million for the three months ending March 31, 2002 and 2001. Management fees were the largest expense. Management fees for the three months ended March 31, 2002 and 2001 were $2.2 million and $2.1 million respectively. Interest expense increased from $0.7 million for the three months ended March 31, 2001 to $1.0 million for the three months ended March 31, 2002. Included in these amounts are the realized portion of the interest hedge transactions. The increase in interest expense was primarily due to the increase in outstanding bank loans from $43.9 million as of March 31, 2001 to $75.6 million as of March 31, 2002.

Total other operating expenses for the three months ending March 31, 2002 and 2001 was $0.7 million and $0.3 million respectively. Legal and banking related fees comprised a majority of the other operating expenses for the three months ended March 31, 2002 and 2001. The majority of the increase in total other operating expenses is due to the increased bank fees which was the result of increasing the capacity of the debt facility.

Net investment income for the three months ending March 31, 2002 and 2001 was $3.9 million and $0.2 million respectively

The Fund had an unrealized loss of $0.9 and $3.3 million for the three months ended March 31, 2002 and 2001. This unrealized loss was due primarily to an adjustment to fair value of loans from borrowers. Included in the unrealized loss for the three months ended March 31, 2002 and 2001 is a $0.6 million unrealized gain and $0.2 million unrealized loss resulting from interest rate hedging transactions. The Fund incurred a realized loss from investment transactions of $1.0 million and $0 for the three months ended March 31, 2002 and 2001. This realized loss was from the writing off of a loan.

Net income (loss) for the three months ended March 31, 2002 and 2001 was $2.0 million and ($3.2) million respectively. On a per share basis, the net income (loss) was $20.19 and ($32.00) for the three months ended March 31, 2002 and 2001 respectively.

Liquidity and Capital Resources --	March 31, 2002 and December 31, 2001

Total capital contributed to the Fund was approximately $155.0 million at March 31, 2002 and December 31, 2001. Committed capital to the Company at March 31, 2002 and December 31, 2001 was $361.9 million, of which $162.8 million has been called.

The Fund has in place a $250.0 million debt facility to finance the acquisition of asset-based loans. As of March 31, 2002 and December 31, 2001, lenders had committed $170.0 million toward this facility. As of March 31, 2002 and December 31, 2001, $75.6 million and $80.0 million were outstanding under this facility.

At March 31, 2002 and December 31, 2001, the Fund had interest rate swap transactions outstanding with a total notional principal amount of $80.9 million and $90.0 million respectively. The effect of these swap transactions is to convert the floating rate commercial paper into a fixed rate on the contract notional value. The amortization schedule for each borrowing under the facility is expected to correspond to the amortization of the loans supporting each borrowing.



As of March 31, 2002 and December 31, 2001, 12% and 9% of the Fund's assets consisted of cash and cash equivalents. The Fund continued to invest its assets in venture loans and during the period. Amounts disbursed under the Fund's loan commitments increased by approximately $25.4 million during the three months ending March 31, 2002. Net loan amounts outstanding after amortization decreased by approximately $11.1 million for the same three month period. Unfunded commitments increased by approximately $20.3 million for the three months ended March 31, 2002. $195.5 million of the unfunded commitments will expire prior to funding.

|                  | Amount Disbursed | Principal Reductions | Balance Outstanding | Unfunded Commitments
|----------------- | ---------------- | -------------------- | ------------------- | --------------------
|March 31, 2002    | $323.2 million   | $130.1 million       | $193.1 million      | $314.5 million      
|December 31, 2001 | $297.8 million   | $93.6 million        | $204.2 million      | $294.2 million      

Because venture loans are privately negotiated transactions, investments in these assets are relatively illiquid.







Item 3. Quantitative and Qualitative Disclosures About Market Risk



The Fund's business activities contain elements of risk. The Fund considers the principal types of market risk to be interest rate risk and credit risk. The Fund considers the management of risk essential to conducting its businesses and to maintaining profitability. Accordingly, the Fund's risk management procedures are designed to identify and analyze the Fund's risks, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.

The Fund manages its credit risk by maintaining a portfolio that is diverse by industry, size of investment, stage of development, and borrower. The Fund has limited exposure to public market price fluctuations as the Fund primarily invests in private business enterprises and the Fund distributes all equity upon receipt.

The Fund's sensitivity to changes in interest rates is regularly monitored and analyzed by measuring the characteristics of assets and liabilities. The Fund utilizes various methods to assess interest rate risk in terms of the potential effect on interest income net of interest expense, the value of net assets and the value at risk in an effort to ensure that the Fund is insulated from any significant adverse effects from changes in interest rates.

Based on the model used for the sensitivity of interest income net of interest expense, if the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 100 basis point change in interest rates would have affected net income by less than 1% for the three months ended March 31, 2002. Although management believes that this measure is indicative of the Fund's sensitivity to interest rate changes, it makes estimates to adjust for potential changes in credit quality, size and composition of the balance sheet and other business developments that could affect net income. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by these estimates.



PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

The Fund may become party to certain lawsuits from time to time in the normal course of business. While the outcome of these legal proceedings cannot at this time be predicted with certainty, the Fund does not expect these proceedings will have a material effect upon the Fund's financial condition or results of operation.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4.	Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits

None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

VENTURE LENDING & LEASING III, INC.

(Registrant)

|By:	/S/ Ronald W. Swenson            | By:	/S/ Brian R. Best  
|------------------------------------ | -----------------------
|Ronald W. Swenson                    | Brian R. Best          
|Chairman and Chief Executive Officer | Chief Financial Officer
|Date:	May 2, 2002                    | Date:	May 2, 2002