Horizon Technology Finance Corporation (HRZN): Business Model Canvas [Dec-2025 Updated]

You're trying to map out Horizon Technology Finance Corporation's (HRZN) game plan as we head into late 2025, especially with the Monroe Capital Corporation merger looming, so let's cut right to the chase: their core business is simple but effective. They originate secured venture debt for tech and life science companies, using their $603.5 million portfolio (Q3 2025) to generate primary interest income while grabbing equity upside via warrants. Honestly, seeing how they pair their specialized lending expertise with a massive $151.4 million in available liquidity-all while managing the upcoming merger-shows a firm focused on scale and high-yield returns. Check out the full canvas below to see the precise structure driving their revenue streams and key partnerships.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Key Partnerships

You're looking at the network of entities that help Horizon Technology Finance Corporation (HRZN) fund its deals and manage its structure. These aren't just vendors; they are integral to its capital base and deal flow.

Monroe Capital (external investment adviser and affiliate)

Horizon Technology Finance Corporation is an affiliate of Monroe Capital. Monroe Capital itself is a premier asset manager with approximately $22 billion in assets under management (AUM) as of late 2025. This relationship is foundational, providing backing and likely supporting deal flow and operational structure.

Monroe Capital Corporation (MRCC) for the pending merger

The proposed merger with Monroe Capital Corporation (MRCC) is a major structural partnership. The transaction is structured as a NAV-for-NAV share exchange.

• The merger is expected to add approximately $165 million in equity capital to Horizon Technology Finance Corporation.
• The combined entity is projected to have a pro forma Net Asset Value (NAV) of approximately $446 million.
• MRCC's NAV as of September 30, 2025, was $173.0 million, or $7.99 per share.
• The illustrative NAV-for-NAV exchange ratio was calculated between 1.1313 to 1.1373 shares of HRZN per MRCC share.
• MRCC shareholders are expected to own approximately 37% of the new entity post-merger.
• The combined entity anticipates annualized General and Administrative (G&A) expense savings of $2.5 million, representing a 30% reduction.
• The closing was anticipated for December 2025.

Senior secured credit facility providers (e.g., large U.S. insurance company)

Horizon Technology Finance Corporation relies on significant debt facilities, often provided by large institutional partners like a U.S.-based insurance company, to finance its portfolio growth. You see the utilization fluctuate based on funding needs.

Here's a look at the key debt facilities as of the third quarter of 2025:

The $250.0 million facility with the insurance company had $181.0 million outstanding as of June 30, 2025, at 6.55%. Horizon Technology Finance Corporation increased a senior secured debt facility commitment by $100 million in Q2 2025 to allow its subsidiary to issue up to $200.0 million of secured notes.

Venture Capital and Private Equity firms (deal sourcing and co-investors)

The core business model involves lending to venture capital and private equity-backed companies. These firms are sources of deals, and sometimes, co-lenders on those deals.

• In January 2025, HRZN purchased a $2.9 million debt investment from a co-lender for a purchase price of $0.5 million.
• In Q1 2025, a $25.5 million funding to Castle Creek Biosciences, Inc. included a $3.8 million portion used to prepay an existing loan to a co-lender.
• In Q3 2025, HRZN purchased the remaining assets of a co-lender for a purchase price of $22.5 million.

Co-lenders for syndicated debt transactions

Syndication is used to share risk and increase the size of individual loan commitments. The interaction with co-lenders is direct, as seen in portfolio company financings and asset purchases.

• The $3.8 million payment to a co-lender in Q1 2025 related to the Castle Creek Biosciences, Inc. transaction is a clear example of a syndicated deal unwind/re-up.
• The purchase of co-lender assets in Q3 2025 for $22.5 million involved assets with a fair value of $36.5 million and a principal balance of $34.9 million.

Finance: draft pro forma leverage ratio analysis post-merger by next Tuesday.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Key Activities

Originate and underwrite secured venture debt loans

Horizon Technology Finance Corporation focuses on providing capital in the form of secured loans to venture capital and private equity-backed companies in the technology, life science, healthcare information and services, and sustainability industries. The activity involves identifying, structuring, and closing new debt investments.

Key origination and underwriting metrics for 2025 include:

• Funded nine loans totaling $100.3 million in Q1 2025.
• Closed new loan commitments totaling $121.8 million to seven companies in Q1 2025.
• Committed Backlog stood at $235.5 million to 19 companies as of March 31, 2025.
• Funded three loans totaling $15.0 million during Q3 2025.
• Committed Backlog was $119 Million as of the end of Q3 2025.

Manage and monitor a $603.5 million investment portfolio (Q3 2025)

The management activity centers on overseeing the existing debt and equity positions to maximize return through current income and capital appreciation from warrants. This includes monitoring portfolio company performance and managing credit risk.

Capital raising through ATM offerings and debt issuances

Horizon Technology Finance Corporation actively raises capital to fund new investments and manage its balance sheet structure, using both equity and debt instruments.

Capital raising activities reported in 2025:

• Sold shares under the 'at-the-market' ('ATM') offering program, raising total net proceeds of approximately $3.6 million in Q1 2025.
• Raised total net proceeds of approximately $10.6 million through the ATM program in Q3 2025.
• Entered into a note purchase agreement in September 2025 for $40,000,000 aggregate principal amount of 5.50% Convertible Notes due 2030, receiving net proceeds of approximately $36.6 million.
• The $40 million convertible notes offering was used in part to retire Asset-Backed Notes (2022 Notes) with an interest rate of 7.56%.

Manage liquidity events, prepayments, and warrant/equity sales

Managing the cash flow from the portfolio through scheduled payments, early repayments, and the realization of value from associated equity instruments is a core daily activity.

Liquidity events observed during 2025:

Execute the strategic merger with Monroe Capital Corporation

A major strategic activity in late 2025 was the execution of the definitive merger agreement with Monroe Capital Corporation (MRCC), with an anticipated closing by the end of Q4 2025. This is designed to enhance scale and efficiency.

Key financial impacts projected from the merger:

• The transaction is expected to add approximately $165 million in equity capital to Horizon.
• The combined entity is projected to have a pro forma Net Asset Value (NAV) of approximately $446 million.
• MRCC shareholders are expected to own approximately 37% of the new entity upon completion.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Key Resources

You're looking at the core assets Horizon Technology Finance Corporation (HRZN) relies on to execute its venture debt strategy as of late 2025. These aren't just line items; they are the fuel for deal flow and potential upside.

Core Financial Capacity and Portfolio Size

The scale of the investment portfolio as of September 30, 2025, was $603.5 million total investment portfolio. This portfolio is structured to generate high current income, evidenced by the dollar-weighted annualized yield on average debt investments for the third quarter of 2025 being 18.6%.

Liquidity remains a key resource for funding new commitments. As of September 30, 2025, available liquidity stood at $151 million, which consisted of $130 million in cash and $21 million in funds available under existing credit facilities. The company also maintained a committed and approved backlog of $119 million at the end of the third quarter.

Here's a quick look at the key balance sheet and performance metrics from that period:

The ability to generate this income is tied directly to the equity component embedded in the deals. Horizon held a portfolio of warrant and equity positions in 95 companies as of September 30, 2025, with a fair value of $40 million. Structuring investments with warrants is a core part of the strategy.

Venture Debt Expertise and Platform Strength

The specialized expertise is reflected in the platform's execution, which allows for high yields and consistent income generation. The investment adviser is Horizon Technology Finance Management LLC. The platform achieved onboarding yields of 12.2% for the third quarter of 2025.

The resource of expertise translates into tangible results:

• Debt Portfolio Yield (Q3 2025): 18.6%
• Net Investment Income (Q3 2025): $14.0 million
• Net Unrealized Appreciation on Investments (Q3 2025): $40.5 million
• Undistributed Spillover Income (As of September 30, 2025): $0.93 per share

Strategic Relationship for Scale and Deal Flow

A critical non-financial resource is the corporate structure itself. Horizon Technology Finance Corporation is an affiliate of Monroe Capital. Monroe Capital is described as a premier asset management firm specializing in private credit markets across various strategies, including technology finance and venture debt. This relationship is expected to enhance HRZN's capabilities in the venture lending market, especially considering the pending merger with Monroe Capital Corporation.

Finance: draft Q4 2025 liquidity projection by next Tuesday.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Value Propositions

You're looking at how Horizon Technology Finance Corporation (HRZN) delivers value to its clients-the growth-stage companies needing capital. The core proposition is providing capital that doesn't force an immediate sale of company ownership, which is a big deal for founders and early investors.

Non-dilutive, secured debt financing for growth-stage companies is the foundation. HRZN specializes in extending secured loans to venture capital and private equity-backed firms, focusing on specific high-growth areas. This means the company gets the cash it needs without immediately selling off a chunk of its equity, preserving ownership control for existing shareholders.

The structure is inherently designed for a higher return profile than standard lending. It's high-yield debt with upside potential via warrants/equity. You get the regular income from the loan, plus a kicker. Here's a look at the yield performance as of the third quarter of 2025:

This structure helps maximize the total return profile. Also, the company held $130.9 million in cash and had $329.0 million in credit facility capacity as of September 30, 2025, giving it dry powder to deploy.

HRZN targets specific, high-growth markets where they claim niche expertise. This focus is key to underwriting risk and demanding higher returns. This is the capital for specific high-growth sectors (Tech, Life Science, Sustainability) proposition:

• Life Science: around 42% of the portfolio.
• Technology: around 33% of the portfolio.
• Healthcare Information and Services: around 15% of the portfolio.
• Sustainability: around 10% of the portfolio.

The financing itself offers flexible financing structures tailored to venture-backed firms. HRZN provides senior secured loans, which are typically the most secure form of debt in a venture capital stack. The total investment portfolio stood at $603.5 million at the end of Q3 2025.

Finally, a major planned value enhancement comes from the pending combination with Monroe Capital Corporation (MRCC). This is the increased scale and capital base post-MRCC merger proposition. The transaction, expected to close by the end of 2025, is set to significantly boost the firm's capacity to originate larger deals.

Here's the quick math on the expected scale increase based on June 30, 2025 figures:

• Expected net cash proceeds to HRZN: approximately $165 million.
• Projected pro forma Net Asset Value (NAV) of the combined entity: approximately $446 million.
• Expected annualized G&A expense savings: $2.5 million (a 30% reduction).

This combination is intended to create a larger, more sophisticated, and diversified portfolio, which should help in securing future financing on better terms. Finance: draft the post-merger capital deployment strategy by next Wednesday.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Customer Relationships

You're running a high-growth tech or life science company, and you need capital that understands your runway isn't a straight line. Horizon Technology Finance Corporation (HRZN) builds its customer relationships on being a specialized, hands-on partner, not just a lender. This high-touch service is delivered by their experienced team of investment and operations professionals.

This team has deep roots in the space; collectively, they've originated and invested more than $5 billion in venture loans to thousands of companies over the years. Since 2004, HRZN has directly originated and invested $3.8 billion across more than 360 growing companies. They pride themselves on being a value-added and user-friendly partner to management and sponsors. Honestly, their goal isn't just to close a deal; it's to structure a financing solution that genuinely propels the portfolio company forward.

The relationship focus is definitely long-term. Like their portfolio companies, Horizon Technology Finance is forward-looking, taking the long view to bridge the financial gap until the company reaches its next major milestone. This patient approach is key for companies that need capital to fund growth while maximizing equity returns through lower-cost, less dilutive debt capital.

Proactive portfolio monitoring is where the rubber meets the road. They don't just fund and forget; they use their industry knowledge and financial rigor to stay close to the companies. This is critical for managing credit risk in volatile tech sectors. Here's a quick look at the portfolio health as of late 2025:

That internal credit rating system is your early warning radar. For instance, as of September 30, 2025, they had four debt investments with an internal credit rating of 1, representing an aggregate cost of $61.3 million. Still, they manage downside situations, as evidenced by achieving positive outcomes on two stressed investments during Q3 2025. They use their experience to work with portfolio companies to find positive solutions when things get tough. Their annualized portfolio yield on debt investments for the third quarter of 2025 was 18.6%, showing strong returns despite credit challenges.

Direct communication is supported by a physical footprint. Horizon Technology Finance Corporation is headquartered in Farmington, Connecticut, which anchors their East Coast operations. Plus, they maintain a regional office in Pleasanton, California, placing investment professionals directly in key technology hubs across the U.S. This structure helps them maintain close, responsive relationships with their venture-backed clients, no matter where they are located.

• Headquarters Location: Farmington, Connecticut
• Regional Office Location: Pleasanton, California
• Investment Professionals: Located throughout the U.S.

Finance: draft the Q4 2025 portfolio stress-test scenario by next Tuesday.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Channels

You're looking at how Horizon Technology Finance Corporation gets its deals-the lifeblood of any specialty finance BDC. The channels they use are a mix of internal muscle, strategic partnerships, and physical presence in key tech hubs.

Direct origination by internal investment team remains a core channel. This is where the internal team sources, vets, and closes the secured loans. For the third quarter ended September 30, 2025, Horizon Technology Finance Corporation funded $15.0 Million of new loans. This direct effort is supported by a substantial pipeline; as of September 30, 2025, the Committed Backlog stood at $119 Million across 16 companies.

The relationship with Monroe Capital is a significant channel multiplier. Horizon Technology Finance Corporation is an affiliate of Monroe Capital, and management has emphasized a renewed focus on leveraging Monroe Capital's broader capabilities to source additional investments. This relationship is set to deepen with the announced merger with Monroe Capital Corporation (MRCC), which is expected to provide HRZN with significant incremental leverageable capital and a larger shareholder base to execute its strategy. Post-merger, the plan is to leverage Monroe Capital's support to originate larger venture loans.

The physical footprint supports deal sourcing and relationship management. You see the corporate office in Farmington, CT, and a key regional office in Pleasanton, CA. To be fair, the geographic reach is wider, as another regional office is mentioned at Monroe Capital in Chicago, IL, and other investment professionals are located throughout the U.S.. The company maintains a broad geographic footprint supporting deal sourcing across innovation hubs.

Industry conferences and venture capital network connections are critical for finding the target market of venture capital and private equity-backed companies in technology, life science, healthcare information and services, and sustainability. The company's strategy involves tapping into these networks to maintain a robust deal flow, which is evidenced by the fact that as of September 30, 2025, HRZN held a portfolio of warrant and equity positions in 95 companies.

Here's a look at the scale and reach tied to these channels as of late 2025:

The immediate post-Q3 activity shows the channels are still active. In October 2025, the company had already funded one $10 million venture loan and was awarded 3 new venture loan transactions totaling $50 million in commitments.

You can see the reliance on the network through the recent acquisition activity. Horizon Technology Finance purchased the remaining assets of a co-lender for a purchase price of $22.5 Million in August 2025, which included debt investments on accrual status with a principal balance of $34.9 Million. This is a direct way to ingest deals sourced by another originator.

The company's overall lending capacity, which feeds these channels, is substantial:

• Cash and credit facility capacity as of September 30, 2025: Cash of $130.9 Million and credit facility capacity of $329.0 Million.
• Net debt to equity leverage ratio as of September 30, 2025: 94%.
• The Key Facility allows for an increase in total loan commitment up to an aggregate commitment of $300.0 Million.

Finance: review the Q4 pipeline conversion rate against the Q3 closing rate of $66.2 Million in new commitments.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Customer Segments

You're looking at the core of Horizon Technology Finance Corporation (HRZN)'s business-who they lend money to. Horizon Technology Finance Corporation (HRZN) focuses its capital, delivered primarily as secured loans, on growth-stage companies that have backing from established financial sponsors or are publicly traded.

The customer base is segmented by industry focus, which is a critical lens for understanding where Horizon Technology Finance Corporation (HRZN) deploys its capital. As of the third quarter ending September 30, 2025, the portfolio allocation by industry was quite concentrated in the top two sectors.

Here is the breakdown of the portfolio by industry focus as of late 2025:

The types of companies receiving this capital are defined by their funding structure, which is a key qualifier for Horizon Technology Finance Corporation (HRZN) investments.

• Venture capital-backed technology companies: These are firms that have secured funding from venture capital firms and are often in high-growth, pre-profitability stages.
• Life science and healthcare information/services companies: This group includes firms developing novel therapies, medical devices, or providing critical healthcare technology services. For example, as of June 30, 2025, Horizon Technology Finance Corporation (HRZN) funded a developer of innovative medical devices and therapies.
• Private equity-backed and small-cap publicly traded companies: Horizon Technology Finance Corporation (HRZN) provides capital to companies backed by private equity firms and also extends secured loans to smaller, publicly listed entities. Following the announced merger with MRCC, the ability to serve small-cap public market companies became an explicit, renewed focus.
• Companies focused on the sustainability industry: This segment includes firms working on environmental or resource-efficiency solutions. An example from Q1 2025 involved an investment in an operator of conservation memorial forests.

To support these lending activities, Horizon Technology Finance Corporation (HRZN) maintains a significant number of equity and warrant positions, which offer potential for capital appreciation alongside the debt income. As of September 30, 2025, Horizon Technology Finance Corporation (HRZN) held portfolio of warrant and equity positions in 95 companies. To be fair, 86 of those were private companies. Finance: draft 13-week cash view by Friday.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Cost Structure

You're looking at the core costs Horizon Technology Finance Corporation (HRZN) incurs to run its specialty finance operation, which is heavily influenced by its debt structure and its relationship with its external adviser, Horizon Technology Finance Management LLC (HTFM).

The cost structure is dominated by the expense of funding its investment portfolio and the fees paid to HTFM for managing those assets. Here's a breakdown based on the latest available 2025 figures, primarily from the third quarter ending September 30, 2025.

Interest Expense on Debt

Funding the investment portfolio requires significant debt, which translates directly into interest expense. This is a variable cost tied to the outstanding borrowings and prevailing interest rates.

As of the third quarter of 2025, Horizon Technology Finance Corporation had specific debt instruments contributing to this cost:

• Outstanding principal balance under the senior secured credit facility: \$90.0 million.
• Interest rate on that facility: 7.21%.
• The 2022 Asset-Backed Notes bore a fixed interest rate of 7.56% per annum.

For context on the quarterly impact, total expenses for the quarter ended September 30, 2025, were \$12.0 million, compared to \$12.4 million for the same period in 2024. The increase in interest expense in Q1 2025 was noted as \$0.5 million over Q1 2024.

Base Management and Incentive Fees to the External Adviser

The external adviser, HTFM, is compensated through a base management fee and a performance-based incentive fee. These fees are a direct cost of operations, calculated based on the size of the asset base.

Here are the fee figures for the three months ended September 30, 2025:

Looking at the cumulative nine months ending September 30, 2025, the base management fee totaled \$8,887 thousand (or \$8.887 million). The base management fee for Q3 2025 actually saw a slight decrease of \$0.2 million compared to Q3 2024, attributed to a lower average weighted size of the portfolio in the quarter.

Operating Expenses

Beyond the direct financing and advisory costs, Horizon Technology Finance Corporation incurs general operating expenses, which include administrative and professional fees. These are often grouped as General and Administrative (G&A) expenses.

Total expenses for recent quarters in 2025 were:

• For the three months ended March 31, 2025: \$13.4 million.
• For the three months ended June 30, 2025: \$12.7 million.
• For the three months ended September 30, 2025: \$12.0 million.

The announced merger with Monroe Capital Corporation (MRCC) is expected to create efficiencies here. The combined entity anticipates annualized G&A expense savings of \$2.5 million, which represents a 30% reduction in expenses, specifically targeting professional fees and administrative fees.

Potential Fee Waivers Post-Merger

To support the transaction and shareholders, the external adviser, HTFM, has committed to a temporary reduction in its fees following the expected closing in the fourth quarter of 2025.

The terms of this cost reduction are specific:

• Aggregate fee waiver amount: Up to \$4 million.
• Duration: Over the first four full fiscal quarters following the closing of the Merger.
• Quarterly cap: The waiver will be implemented at a rate of up to \$1 million per quarter.

It's important to note that the fee waiver for any given quarter will not exceed the total amount of base management and incentive fees earned by HTFM during that specific fiscal quarter.

Finance: draft 13-week cash view by Friday.

Horizon Technology Finance Corporation (HRZN) - Canvas Business Model: Revenue Streams

The revenue streams for Horizon Technology Finance Corporation (HRZN) are fundamentally driven by its investment portfolio, which primarily consists of debt and equity positions in technology, life science, healthcare IT, and sustainability companies. You're looking at a model where the core income is the interest earned on senior secured loans, supplemented by fees and equity upside.

The Total Investment Income for the full Fiscal Year 2025 is projected at approximately $115.0 million. This is supported by a strong current yield environment; for instance, the dollar-weighted annualized yield on average debt investments in the third quarter of 2025 reached 18.6%.

The primary revenue component is Interest income from secured debt investments. This is the engine of Horizon Technology Finance Corporation's earnings. For the third quarter of 2025, the Total Investment Income was $26.3 million, which the company noted was driven primarily by higher fee and interest income on investments from the debt portfolio.

The secondary, but significant, component is Fee income, which includes end-of-term, prepayment, and commitment fees. These fees enhance the overall yield Horizon Technology Finance Corporation captures from its loan coupons. For example, in September 2025, a portfolio company repaid its loan, which included an end-of-term payment and prepayment fee alongside the principal and interest. Similarly, in the second quarter of 2025, a loan repayment included an end-of-term payment and prepayment fee on a $17.5 million principal balance. The company aims to maximize its total yield by engaging in these fees, topping the typical industry average Internal Rate of Return (IRR) of around 10% from loan coupons.

The third stream involves Gains/proceeds from the sale or exercise of warrants and equity. These represent the upside potential from the equity components attached to the debt investments. Horizon Technology Finance Corporation held portfolio of warrant and equity positions in 95 companies as of September 30, 2025. Specific liquidity events in Q3 2025 included the sale of an equity investment for gross proceeds of $0.6 million. In the prior quarter (Q2 2025), proceeds totaling $0.6 million were received from the redemption of warrants in Fictiv.

You can see the quarterly flow of Total Investment Income below, which is the sum of interest and fee income, before considering gains from warrants:

The projected Net Investment Income per share for the full FY2025 stands at $1.12 per share.

The sources contributing to the overall investment income are concentrated in specific sectors:

• Life Sciences: around 42% of the portfolio.
• Technology: around 33% of the portfolio.
• Healthcare-IT: around 15% of the portfolio.
• Sustainability: around 10% of the portfolio.

The company also benefits from a committed backlog, which provides a pipeline for future interest and fee income. This backlog stood at $119 million at the end of Q3 2025.

For your reference, here are the key liquidity events that feed into the fee and equity income streams:

• Q3 2025 Liquidity Events: Eight portfolio companies.
• Q2 2025 Liquidity Events: Seven portfolio companies.
• Q3 2025 Equity Proceeds: Sale of investment for $0.6 million.

Finance: draft 13-week cash view by Friday.