When a lender agrees to a deal, they are committing a million of dollars to the startup. Therefore, they want to get paid both in cash interest and some equity upside via warrants. The lender wants as much equity based committed upfront as possible.However, the startup wants to preserve as much option value as possible and will ask for the warrant coverage to be based on usage, or the amount drawn down. Often a startup borrower only draws down a portion of the loan so paying all the warrant coverage upfront on committment seems like a waste.Deals typically end up in the middle with half of the total warrant coming upfront based on commitment and a half on usage. A simple example with easy math is as follows: Warrant Coverage on a venture debt deal is 6% of the total deal amount. About 3% of that would be based on commitment, and 3% on usage. Negotiating warrant coverage to be based on usage can save the startup a lot of unnecessary equity dilution and make venture debt even more attractive.