Venture debt is available with either senior (first position) or junior (second behind another lender) lien structures. It is important to understand that subordinated lenders (junior position) are taking significant incremental risks, and that those risks are reflected in higher loan costs. Another consideration is the structure of the inter-creditor agreement between the senior and junior debtholders. Some junior lenders may describe their loans as “covenant free,” for example, even though the junior debt is in default if the company defaults on any aspect of the loan agreement with the senior lender. In effect, both loans are covenanted.