Fundraising and dilution
Venture debt calculator
Venture debt adds runway with less dilution, but it has a cost. See monthly payments, total interest and fees, and the warrants the lender receives.
Fixed rate, monthly payments, straight-line amortisation as an annuity after the interest-only period. Prepayment fees and floating rates are not modelled.
How it works
A typical facility has an interest-only period of 6 to 18 months, then monthly repayments over 24 to 36 months. Lenders also charge fees and take warrants, a right to buy shares, usually sized as a percentage of the loan.
The real cost combines interest, fees and the warrants' dilution. Compare it with the equity you would otherwise sell for the same runway.
The formula
- Interest-only paymentsLoan x annual rate / 12.
- Repayment paymentsAnnuity: loan x r / (1 - (1 + r) ^ -months), with r the monthly rate.
- Total costAll interest + fees; warrants = loan x coverage.
Worked example
A $2 million loan at 12% with 12 months interest-only and 24 months repayment: $20,000 a month at first, then about $94,000; total interest about $500,000, plus $60,000 of fees and $200,000 of warrant coverage.
Put the numbers in your data room
Lenders review the latest equity round, runway and IP. Give them a lender group in your existing data room rather than building a new one.
Venture debt calculator FAQ
What is warrant coverage?
The lender receives warrants worth a percentage of the loan, priced at the last round. 5% to 15% is common.
When is venture debt a good idea?
After an equity round, to extend runway to a milestone, when revenue or investor support is strong enough to repay it.
What are covenants?
Conditions the company must meet, such as minimum cash. Many venture lenders offer covenant-light terms.