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Debt vs. equity decision model

Compare what a loan costs in payments with what equity costs in ownership — including a bad-year test.

Blue = you enterGreen = calculatedGray = assumptionAmber/red = check this

Capital needed

Assumed pre-money value

Your assumption, not an appraisal.

Assumed future value at exit

Loan rate

Loan term

years

Annual cash flow

Existing annual debt payments

Downside case: cash-flow drop

Debt

Annual payments

$147,096

Total interest

$279,671

DSCR (base)

2.04x

DSCR (downside)

1.53x

Equity

Investor ownership

20.0%

You keep

80.0%

At an exit of $6,000,000, your share is about $4,800,000 with equity vs. $6,000,000 with debt (assuming the loan is repaid from cash flow by then).

Simple priced-round math. Real equity terms (preferences, board seats, future rounds) and loan terms (fees, covenants, guarantees) can change the outcome a lot. Not an offer, valuation or securities advice.

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Estimates only. Results vary. No guarantee of approval, rates or savings.

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The formulas

Investor % = capital ÷ (pre-money value + capital).
Loan payment uses a fully amortizing fixed-rate schedule.
Downside DSCR = cash flow after your stress drop ÷ total annual debt payments.

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Debt vs. equity decision model

The formulas

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