A $300,000 loan costs Dispatchly $79,207 in interest. The same raise as equity could cost $915,527 to $2,683,983 — and the loan's own coverage ratio still comes back negative in the company's worst month

The moment

Dispatchly is twenty months old now: the same four-person shop in Austin, Texas — co-founders Naomi Reyes and Ethan Cho, plus two engineers — that closed its $1,000,000 seed round back in September. Eleven paying customers then. Thirty now, all small trade-contractor outfits running their dispatch and scheduling through the product, and the growth is the reason the company needs money again: two sales hires, to go find the next thirty instead of waiting for them to find Dispatchly.

Two offers landed the same week, the second week of March. A regional venture-debt fund, introduced by a board member, quoted $300,000 at 12% over four years — a real term sheet, not an estimate. Separately, the same fund that led the seed round offered to write another check for the same $300,000, this time for 3% of the business, priced off a $10,000,000 valuation — a step up from the $9,000,000 the company was worth when that fund first invested, reflecting the six months since. No new lead, no new board seat, just an extension of the round already on the books.

Naomi's first reaction was that the choice was obvious. $300,000 borrowed at 12% for four years is a fixed, known cost. $300,000 raised for 3% of a company that might be worth many times more in five years is, on paper, a far bigger number. Before either offer got a reply, she wanted the actual figures next to each other, priced the same way.

What they did instead

An owner without a tool for this usually does the comparison Naomi's gut already ran: look at the loan's monthly payment, glance at the bank balance, decide it looks affordable this month and probably next month too, and sign. The percentage given up for equity gets weighed against a vague sense of "not wanting to give away the company," never against an actual dollar figure five years out — because nobody sits down and prices what a percentage is worth if the growth guess the owner already believes in actually happens.

Both shortcuts cost something real. Skipping past the loan's payment in a genuinely bad month, not an average one, is how a company that looks fine on today's bank balance ends up unable to make next month's payment — and a missed loan payment is a default, a different kind of problem than a lower number on a cap table. Skipping the growth-adjusted equity number means the only two options an owner actually compares are "the loan's monthly bill" and "a percentage," which are not the same unit and were never going to settle anything.

The questions a CFO asks first

1. Priced the same way, in dollars, over the same five years — what does $300,000 actually cost as a loan, and what does it cost as equity at the company's own growth guess?
2. Only the loan comes with a bill every month. Can this business's own worst month, not its average one, actually make that payment?
3. If the lender states its own minimum coverage ratio, does this quote clear it — checked against the lender's actual number, not a rule of thumb this tool invented?
4. What does the equity side actually become worth if the business grows the way the founders themselves expect, priced as a real number instead of left as a static percentage on a cap table?

The arithmetic, shown

Three runs, all through the tool's own engine: the same $300,000 raise, the same 3% ask, the same $10,000,000 valuation and the same 25%–55% growth guess throughout. What changes is the downside cash flow tested against the loan, and whether a lender's own minimum is on the table.

**Scenario one — the loan as quoted, tested against the worst month Dispatchly has actually had.** This past January, two mid-sized customers' payments slipped past their due date the same week payroll went out, and the company's cash flow for that month came to -$3,500. No lender minimum was quoted yet at this point in the conversation.

Priced this way, the loan is not close: $79,207 against a range more than ten times that size at the low end alone. But run against January's actual number, the tool's coverage-ratio line reads: this loan's coverage ratio would be -0.44×. Negative — the worst month on record would not have covered the payment at all, let alone with room to spare.

**Scenario two — the lender's own minimum, tested against a less severe downside.** The venture-debt fund came back with its own underwriting number: a smoothed, seasonally-adjusted downside of $5,500 a month — friendlier than January's actual number — and a stated minimum coverage ratio of 1.25×. Same loan, same $300,000, same 12%, same four years.

The result: this loan's coverage ratio would be 0.70× — short of the 1.25× minimum the lender itself requires. Even on the lender's own more forgiving downside case, not Dispatchly's worst actual month, the loan does not clear the bar the lender set for it.

Scenario three — the growth guesses and the downside left blank. Run with nothing entered for either growth guess or the downside cash flow, the tool returns a named refusal rather than a guess: it will not price the equity side without a growth range, and it will not compute a coverage ratio without a downside figure, so it asks for both by name instead of filling either in.

What changed

Naomi and Ethan turned down the venture-debt offer and took the equity extension instead — not because $300,000 as equity was cheaper (on this math, it was not, by a wide margin) but because the loan's own coverage ratio came back negative against the company's actual worst month, and still fell short of the lender's own covenant even on the lender's friendlier downside case. A loan the company might not be able to service in a bad month is a different kind of risk than a percentage that costs more only if the company succeeds — and the two are not the same trade, whatever the five-year dollar figures alone suggest.

They wrote one note for themselves before moving on: this was not a verdict on debt in general. A later round, once cash flow clears a comfortable margin above zero in a bad month rather than sitting below it, could price very differently against the same lender's same covenant. What changed this time was the coverage ratio on this raise, checked against this company's own numbers — not a rule about debt that would apply to every raise after it.

What the tool will not do

It will not price warrant coverage. Venture debt often comes with warrants attached — the right to buy a small slice of equity later, on top of the interest — and a quote with warrants riding along costs more than the interest figure by itself shows. This tool prices a loan as a pure interest instrument only.

It will not price a blended raise. Real financings often split the same round across a loan and an equity check, or a note that later converts. This tool prices the full $300,000 as one path or the other, never a mix of both in the same run.

It will not say whether a negative or below-covenant coverage ratio means a loan should be declined. It computes the ratio and compares it only against a minimum the owner supplies from their own lender — never against a number this tool invented or a rule of thumb about what banks "generally" want.

It will not price any covenant beyond the coverage ratio itself. A real loan agreement usually carries more terms — a minimum cash balance, reporting requirements, a material-adverse-change clause — that this tool has no way to know about and does not attempt to price.