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

For the quarterly period ended March 31, 2004



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

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ______________



Commission file number 814-00207

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 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes __No Ö



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, 2004

Common Stock, $.001 par value			100,000



EXPLANATORY NOTE



Venture Lending & Leasing III, Inc. intends to restate its financial statements for the years ended December 31, 2001, 2002, and 2003, to reflect a correction in the amount of interest income recognized each year. The statement of financial position as of December 31, 2003, the statement of operations for the three months ended March 31, 2003, and the statement of cash flows for the three months ended March 31, 2003, contained in this quarterly Report on Form 10-Q have been restated. For a description of the restatement, see "Restatement" in note 2 to the accompanying unaudited condensed financial statements. In addition, at the earliest possible time in the second quarter of 2004, Venture Lending & Leasing III, Inc. expects to file an amended Annual Report on Form 10-K/A for the year ended December 31, 2003.









VENTURE LENDING & LEASING III, INC.

INDEX



PART I -- FINANCIAL INFORMATION

Item 1.		Financial Statements (As restated)

Condensed Statements of Financial Position (Unaudited)

As of March 31, 2004 and December 31, 2003 (As restated)

Condensed Statements of Operations (Unaudited)

For the Three Months Ended March 31, 2004 and 2003 (As restated)

Condensed Statements of Changes in Shareholder's Equity (Unaudited)

For the Three Months 	Ended March 31, 2004

Condensed Statements of Cash Flows (Unaudited)

For the Three Months Ended March 31, 2004 and 2003 (As restated)

Notes to Condensed Financial Statements (Unaudited)

Item 2.	Management's Discussion and Analysis of Financial

Condition and Results of Operations

Item 3. Quantitative & Qualitative Disclosures About Market Risk

Item 4. 	 Disclosure Controls and Procedures

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.

CONDENSED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

AS OF MARCH 31, 2004 AND DECEMBER 31, 2003

|                                                           |  | March 31, 2004  |  | December 31, 2003
|---------------------------------------------------------- |  | --------------- |  | -----------------
|                                                           |  |                 |  | As Restated      
|                                                           |  |                 |  | See Note 2       
|ASSETS                                                     |  |                 |  |                  
|Loans at estimated fair value                              |  |                 |  |                  
|(Cost of $116,127,861 and $127,030,246)                    |  | $ 109,469,221   |  | $ 122,926,428    
|Cash and cash equivalents                                  |  | 10,392,419      |  | 12,102,263       
|Other assets                                               |  | 1,877,608       |  | 2,567,204        
|                                                           |  | _______________ |  | ________________ 
|Total assets                                               |  | $ 121,739,248   |  | $ 137,595,895    
|                                                           |  | =============   |  | ==============   
|LIABILITIES AND SHAREHOLDER'S EQUITY                       |  |                 |  |                  
|Liabilities:                                               |  |                 |  |                  
|Borrowings under debt facilty                              |  | $ 43,978,140    |  | $ 59,155,025     
|Accrued management fees                                    |  | 872,809         |  | 965,323          
|Accounts payable and other accrued liabilities             |  | 1,653,032       |  | 1,322,511        
|                                                           |  | _______________ |  | ________________ 
|Total liabilities                                          |  | 46,503,981      |  | 61,442,859       
|                                                           |  | _______________ |  | ________________ 
|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      
|Accumulated distributions                                  |  | (87,063,549)    |  | (85,549,717)     
|Accumulated earnings                                       |  | 7,294,316       |  | 6,698,253        
|                                                           |  | _______________ |  | ________________ 
|Total shareholder's equity                                 |  | 75,235,267      |  | 76,153,036       
|                                                           |  | _______________ |  | ________________ 
|Total liabilities and shareholder's equity                 |  | $ 121,739,248   |  | $ 137,595,895    
|                                                           |  | =============   |  | ==============   















See Notes to Condensed Financial Statements













VENTURE LENDING & LEASING III, INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)



|                                                                    |             | For the Three Months Ended March 31, 2004 | For the Three Months Ended March 31, 2003
|------------------------------------------------------------------- | ----------- | ----------------------------------------- | -----------------------------------------
|                                                                    |             |                                           |                                          
|                                                                    |             |                                           |                                          
|INVESTMENT INCOME:                                                  |             |                                           |                                          
|Interest on loans                                                   |             | $ 4,878,630                               |                                          
|Interest on short-term investments                                  |             |                                           |                                          
|and other income                                                    |             | 46,629                                    |                                          
|                                                                    |             | _______________                           |                                          
|Total investment income                                             |             | 4,925,259                                 |                                          
|                                                                    |             | _______________                           |                                          
|EXPENSES:                                                           |             |                                           |                                          
|Management fees                                                     |             | 752,900                                   |                                          
|Interest expense                                                    |             | 443,587                                   |                                          
|Other operating expenses                                            |             | 511,414                                   |                                          
|                                                                    |             | _______________                           |                                          
|Total expenses                                                      |             | 1,707,901                                 |                                          
|                                                                    |             | _______________                           |                                          
|Net investment income                                               |             | 3,217,358                                 |                                          
|                                                                    |             | _______________                           |                                          
|Net change in unrealized loss from investments and hedging activity | (2,495,264) |                                           | (3,117,748)                              
|Net realized loss from investment transactions                      | (126,031)   |                                           | (1,140,285)                              
|                                                                    |             | _______________                           |                                          
|Net income (loss)                                                   |             | $ 596,063                                 |                                          
|                                                                    |             | =============                             |                                          
|Net income (loss) per share                                         |             | $ 5.96                                    |                                          
|                                                                    |             | =============                             |                                          
|Weighted average shares outstanding                                 |             | 100,000                                   |                                          

















See Notes to Condensed Financial Statements























VENTURE LENDING & LEASING III, INC.

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2004

|                                                      |                                                                     |                  | Capital in   |               |             |             
|----------------------------------------------------- | ------------------------------------------------------------------- | ---------------- | ------------ | ------------- | ----------- | ------------
|                                                      | Common Stock                                                        |                  | Excess of    |               | Accumulated |             
|                                                      | Shares                                                              | Par Value        | Par Value    | Distributions | Earnings    | Total       
|                                                      |                                                                     |                  |              |               |             |             
|                                                      |                                                                     |                  |              |               |             |             
|BALANCE, December 31, 2003 - As previously reported   | 100,000                                                             | $            100 | $155,004,400 | $(85,549,717) | $ 5,279,337 | $ 74,734,120
|Prior Period Adjustment                               |                                                                     |                  |              |               | 1,418,916   | 1,418,916   
|                                                      | ___________________________________________________________________
|BALANCE, December 31, 2003 - As restated - See Note 2 | 100,000                                                             | 100              | 155,004,400  | (85,549,717)  | 6,698,253   | 76,153,036  
|Distributions                                         |                                                                     |                  |              | (1,513,832)   |             | (1,513,832) 
|Net income                                            |                                                                     |                  |              |               | 596,063     | 596,063     
|                                                      | ___________________________________________________________________
|BALANCE, March 31, 2004                               | 100,000                                                             | $ 100            | $155,004,400 | $ 87,063,549) | $ 7,294,316 | $ 75,235,267
|                                                      | ============================================================       



















See Notes to Condensed Financial Statements





VENTURE LENDING & LEASING III, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

|                                                                                              | For the Three  |  | For the Three 
|--------------------------------------------------------------------------------------------- | -------------- |  | --------------
|                                                                                              | Months Ended   |  | Months Ended  
|                                                                                              | March 31, 2004 |  | March 31, 2003
|                                                                                              |                |  | As Restated   
|                                                                                              |                |  | See Note 2    
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                         |                |  |               
|Net income (loss)                                                                             | $ 596,063      |  | $ (463,114)   
|Adjustments to reconcile net income (loss)                                                   
|to net cash provided by operating activities:                                                 |                |  |               
|Net realized loss from investment transactions                                                | 126,031        |  | 1,140,285     
|                                                                                              |                |  |               
|Net change in unrealized loss from investments and hedging activities                         | 2,495,264      |  | 3,117,748     
|Amortization of deferred assets                                                               | 83,085         |  | 445,100       
|Decrease in other assets                                                                      | 606,510        |  | 284,438       
|Net increase (decrease) in accounts payable, accrued liabilities, and accrued management fees | 297,564        |  | (863,455)     
|Acquisition of loans                                                                          | (17,552,028)   |  | (18,393,312)  
|Principal payments on loans                                                                   | 28,328,384     |  | 33,400,846    
|Acquisition of securities                                                                     | (1,377,296)    |  | (137,383)     
|                                                                                              | ____________   |  | ____________  
|Net cash provided by operating activities                                                     | 13,603,577     |  | 18,531,153    
|                                                                                              | ____________   |  | ____________  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                         |                |  |               
|Cash distribution to shareholder                                                              | -              |  | (41,550,000)  
|Deemed distribution to shareholder                                                            | (136,536)      |  | (121,411)     
|Payment of deferred bank and bank related fees                                                | -              |  | (64,460)      
|Borrowings under debt facility                                                                | -              |  | 35,839,518    
|Repayment of borrowings under debt facility                                                   | (15,176,885)   |  | (6,041,228)   
|                                                                                              | ____________   |  | ____________  
|Net cash used in financing activities                                                         | (15,313,421)   |  | (11,937,581)  
|                                                                                              | ____________   |  | ____________  
|Net increase (decrease) in cash and cash equivalents                                          | (1,709,844)    |  | 6,593,572     
|CASH AND CASH EQUIVALENTS:                                                                    |                |  |               
|Beginning of year                                                                             | 12,102,263     |  | 9,863,882     
|                                                                                              | ____________   |  | ____________  
|End of period                                                                                 | $ 10,392,419   |  | $ 16,457,454  
|                                                                                              | ===========    |  | ===========   
|CASH PAID DURING THE PERIOD FOR:                                                              |                |  |               
|Interest                                                                                      | $ 447,866      |  | $ 523,548     
|NON-CASH ACTIVITIES:                                                                          |                |  |               
|Distributions of investment securities to shareholder                                         | $ 1,377,296    |  | $ 1,936,491   

#### 











See Notes to Condensed Financial Statements

VENTURE LENDING & LEASING III, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2004



1. ORGANIZATION AND OPERATIONS OF THE FUND
2. RESTATEMENT
3. SUMMARY OF INVESTMENTS
4. EARNINGS PER SHARE
5. RESTRUCTURE OF DEBT FACILITY AND CAPITAL REDUCTION
6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
7. FINANCIAL HIGHLIGHTS

Accounting principles generally accepted in the United States of America require disclosure of financial highlights of the Fund for the periods presented, the three months ended March 31, 2004 and 2003. 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.

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. Net investment income is inclusive of all investment income net of expenses, and excludes realized or unrealized gains and losses.

Beginning and ending net asset values per share 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:

|                                              | Three Months Ended
|--------------------------------------------- | ------------------
|                                              |                   
|                                              |                   
|                                              | 3/31/04           
|                                              | ____________      
|Total Return *                                | 3.1%              
|                                              | ==========        
|Per Share Amounts:                            |                   
|Net Asset Value, Beginning of Period          | $761.53           
|                                              | ____________      
|Net Investment Income                         | $32.17            
|Net Realized Loss & Change in Unrealized Loss | $(26.21)          
|                                              | ____________      
|Total Income                                  | $5.96             
|Capital Contributions                         | $0.00             
|Capital Distributions                         | $(15.14)          
|                                              | ____________      
|Net Asset Value, End of period                | $752.35           
|                                              | ==========        
|Net Assets, End of period                     | $75,235,267       
|                                              | ==========        
|Ratios to Average Net Assets:                 |                   
|                                              |                   
|Expenses *                                    | 9%                
|Net Investment Income *                       | 17%               
|                                              |                   
|                                              |                   
|* Annualized                                  |                   



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



General

The Fund is 100% owned by Venture Lending & Leasing III, LLC (the "Company"). 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 on Form 10-Q 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. 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.



Restatement

Subsequent to the issuance of its financial statements for the year ended December 31, 2003, management of the Fund determined that the Fund's methodology of accruing interest income one month after it had been earned resulted in accruals that were materially different from amounts that would have been accrued in accordance with generally accepted accounting principles in the United States of America. As a result, interest on loans, other assets, and accumulated earnings have been restated from amounts previously reported.





Filing of Restated Financial Statements

At the earliest possible time in the second quarter of 2004, Venture Lending & Leasing III, Inc. expects to file an amended Annual Report on Form 10-K/A for the year ended December 31, 2003.

For further information of the impact of the restatement on the condensed statement of operations for the three months ended March 31, 2003 and the statement of financial position as of December 31, 2003, see note 2 to the condensed financial statements.

Overview

Venture Lending & Leasing III, Inc. (the "Fund") is a financial services company providing financing and advisory services to a variety of carefully selected venture-backed companies throughout the United States with a focus on growth oriented companies. Our portfolio is well diversified and consists of companies in the communications, information services, media, and technology, including software and technology-enabled business services, bio-technology, and medical devices industry sectors, among others. Our capital is generally used by our portfolio companies to finance acquisitions of fixed assets and working capital. On May 19, 2000, we completed our first closing of capital, made our first investment, and became a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940. The Fund elected to be treated for federal income tax purposes as a regulated investment company under the Internal Revenue Code with the filing of its federal corporate income tax return for 2000. Pursuant to this election, we generally will not have to pay corporate-level taxes on any income we distribute to our stockholders as dividends, allowing us to substantially reduce or eliminate our corporate-level tax liability.

The Fund's investment objective is to achieve a high total return. The Fund seeks to achieve its investment objective by providing debt financing to portfolio companies. Historically, the Fund's investing activities have focused primarily on private debt securities. 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 also has guidelines for the percentages of total assets which will be invested in different types of assets.

The portfolio investments of the Fund consist of debt financing to early and late stage venture capital backed technology companies. The borrower's ability to repay their loans may be adversely impacted by a number of factors, and as a result the loan may not fully be repaid. Furthermore, the Fund's security interest in any collateral over the borrower's assets may be insufficient to make up any shortfall in payments.

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 estimated fair value as determined by management, in accordance with the valuation methods described in the valuation of loans section of footnote 2 of the Fund's Annual Report on Form 10-K for the year ended December 31, 2003 (Summary of Significant Accounting Policies). Critical factors in determining the fair value of a loan include payment history, collateral position, financial strength of the borrower, prospects for the borrower's raising 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 net assets.



Results of Operations -For the Three Months ended March 31, 2004 and 2003

Total investment income for the three months ending March 31, 2004 and 2003 was $4.9 million and $6.5 million, respectively, of which $4.9 million and $6.5 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 decrease in investment income is due primarily to the decline in outstanding performing loans, which averaged $170.6 million for the three months ended March 31, 2003 and $110.1 million for the three months ended March 31, 2004. This impact was partially offset by the increase in average interest yield on loans from 15.2% for the three months ended March 31, 2003 to 17.7% for the three months ended March 31, 2004. The increase in interest yield was due primarily to borrowers who paid a premium in order to pay off their loans early.

Total expenses were $1.7 million and $2.7 million for the three months ending March 31, 2004 and 2003, respectively. Management fees were the largest expense. Management fees for the three months ended March 31, 2004 and 2003 were $0.8 million and $1.1 million respectively. Management fees were lower for the three months ended March 31, 2004 because the asset base declined from $182.5 million as of March 31, 2003 to $121.7 million as of March 31, 2004.

Interest expense was $0.4 million and $0.5 million for the three months ended March 31, 2004 and 2003, respectively. Included in these amounts are the settled portion of the Fund's interest hedge transactions of $0.2 million and $0.2 million for the three months ended March 31, 2004 and 2003, respectively. While average outstanding bank debt rose from $49.9 million for the three months ended March 31, 2003 to $53.3 million for the three months ended March 31, 2004, interest expense declined during the period because rates dropped from 4.3% to 3.3% during the same period. This was primarily due to interest rate declines in general.



Total other operating expenses for the three months ending March 31, 2004 and 2003 were $0.5 million and $1.1 million, respectively. Legal and banking related fees comprised a majority of the other operating expenses for the three months ended March 31, 2004 and 2003. The expense for the three months ended March 31, 2003 included a $0.3 million charge for unamortized bank facility fees due to the reduction in the debt facility. The majority of the remaining decrease in total other operating expenses was the result of the decrease in banking and legal fees.

Net investment income for the three months ending March 31, 2004 and 2003 was $3.2 million and $3.8 million, respectively.

The Fund incurred an unrealized gain (loss) from investments and hedging activity of $(2.5) million and $(3.1) million for the three months ended March 31, 2004 and 2003, respectively. The change in unrealized gain (loss) from investments and hedging activity was due primarily to an adjustment to fair value of loans from borrowers of $(2.6) million and $(3.0) million for the three months ended March 31, 2004 and 2003, respectively. Included in the unrealized gain (loss) for the three months ended March 31, 2004 and 2003 is a $0.1 million unrealized gain and a $(0.1) million unrealized loss, respectively resulting from interest rate hedging transactions.

The Fund incurred a realized loss from investment transactions of $(0.1) million and $(1.1) million for the three months ended March 31, 2004 and 2003, respectively. These realized losses were the result of writing off certain loans deemed to be uncollectible less small recoveries of previously written off loans.

Net income (loss) for the three months March 31, 2004 and 2003 was $0.6 million and $(0.5) million, respectively. On a per share basis, the net income (loss) was $5.96 and $(4.63) for the three months ended March 31, 2004 and 2003, respectively.



Liquidity and Capital Resources -- March 31, 2004 and December 31, 2003

Total capital contributed to the Fund was approximately $155.0 million at March 31, 2004. Committed capital to the Company at March 31, 2004 was $217.1 million, of which $162.8 million has been called and received. The remaining $54.3 million in committed capital is due to expire in May, 2004 as the four year anniversary will have passed, at which time no further capital can be called.



As of March 31, 2004 and December 31, 2003, the Fund had in place a $160.0 million debt facility to finance the acquisition of asset-based loans. As of March 31, 2004 and December 31, 2003, $44.0 million and $59.2 million was outstanding under this facility, respectively.

At March 31, 2004 and December 31, 2003 the Fund had interest rate swap transactions outstanding with a total notional principal amount of $44.2 million and $53.2 million. The effect of these swap transactions is to convert the floating rate bank debt 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, 2004 and December 31, 2003, 9% and 9% of the Fund's assets consisted of cash and cash equivalents. The Fund continued to invest its assets in venture loans during the three months ended March 31, 2004. Amounts disbursed under the Fund's loan commitments increased by approximately $17.6 million during the three months ending March 31, 2004. Net loan amounts outstanding after amortization decreased by approximately $13.4 million for the same period. Unexpired, unfunded commitments increased by approximately $12.2 million for the three months ended March 31, 2004.



|                  | Amount Disbursed | Principal Reductions | Balance Outstanding | Unexpired Unfunded Commitments
|----------------- | ---------------- | -------------------- | ------------------- | ------------------------------
|March 31, 2004    | $504.5 million   | $395.0 million       | $109.5 million      | $67.7 million                 
|December 31, 2003 | $486.9 million   | $364.0 million       | $122.9 million      | $55.5 million                 



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 business 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 securities upon receipt.

The Fund enters into interest rate swap transactions to hedge its interest rate on its bank loans. The net interest received or paid on the transactions is included in interest expense. The fair value of the swap is recorded in other assets or other liabilities and the change in the fair value is recorded as a change in unrealized gain (loss) from investment transactions.

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 $0.1 million. This translates to approximately 1% for the three months ended March 31, 2004. 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.

ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures



As of the end of the period covered by this quarterly report on Form 10-Q, the Fund's chief executive officer and chief financial officer conducted an evaluation of the Fund's disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934). Based upon this evaluation, and due to the matters discussed in the following paragraph with respect to the Fund's internal controls, the Fund's chief executive officer and chief financial officer concluded that the Fund's disclosure controls and procedures were not effective in timely alerting them of any material information relating to the Fund that is required to be disclosed by the Fund in the reports it files or submits under the Securities Exchange Act of 1934.

In connection with the review undertaken concerning the restatements of the Fund's financial statements for the years ended December 31, 2001, 2002, and 2003, and the three months ended March 31, 2003 described in note 2 to the unaudited condensed financial statements, and in the "Restatements" section of the Management's Discussion and Analysis of Financial Condition and Results of Operations, the Fund has re-assessed all its significant accounting policies and procedures and determined that the interest revenue recognition policy is the only policy or practice requiring a modification.

REPORTABLE CONDITION

In addition, as a part of the communications by our independent auditors, Deloitte & Touche LLP (D&T) to the audit committee with respect to D&T's interim audit procedures for the year ending December 31, 2004, D&T informed the audit committee that they had identified the following "reportable condition" which constituted a "material weakness" as each such term is defined under standards established by the American Institute of Certified Public Accountants in the Fund's internal control.

- The Fund's methodology of interest income recognition on its loan portfolio was not consistent with generally accepted accounting principles in the United States of America.

Changes in internal controls

The Fund intends to restate its annual financial statements for the fiscal years ended December 31, 2001, 2002, and 2003 and has restated in this Form 10-Q the financial statements for the three months ended March 31, 2003. Please see note 2 to the unaudited condensed financial statements and "Restatements" in the Management's Discussion and Analysis of Financial Condition and Results of Operations for further information.

In connection with this restatement, senior management performed a review of the circumstances that resulted in the need for restatements, and as a result, the Fund has re-evaluated its processes to ensure its accounting policies are consistent and appropriate under United States generally accepted accounting principles and will continue to evaluate and monitor the effectiveness of internal controls.

The Audit Committee and senior management are currently considering whether additional measures or modifications to the above measures are necessary in order to improve the Fund's internal control over financial reporting.

There were no other significant changes in the Fund's internal controls or in other factors that could significantly affect these controls during the period covered by this quarterly report on form 10-Q.

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 and Reports on Form 8-K

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/ Douglas D. Reed
|------------------------------------ | -----------------------
|Ronald W. Swenson                    | Douglas D. Reed        
|Chairman and Chief Executive Officer | Chief Financial Officer
|Date:	May 21, 2004                   | Date:	May 21, 2004     







CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas D. Reed, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Venture Lending & Leasing III, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



|Date: May 21, 2004     
|-----------------------
|/S/ Douglas D. Reed    
|Douglas D. Reed        
|Chief Financial Officer











CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald W. Swenson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Venture Lending & Leasing III, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: May 21, 2004

/S/ Ronald W. Swenson

Ronald W. Swenson

Chief Executive Officer

CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Venture Lending & Leasing III, Inc. (the "Fund") on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald W. Swenson, Chief Executive Officer of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Fund.



/S/ Ronald W. Swenson

Ronald W. Swenson
Chief Executive Officer
May 21, 2004









CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Venture Lending & Leasing III, Inc. (the "Fund") on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas D. Reed, Chief Financial Officer of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Fund.



/S/ Douglas D. Reed

Douglas D. Reed

Chief Financial Officer
May 21, 2004