Debt, or equity?
About nine questions, three minutes. What a loan costs in interest, what a stake in the business could cost as it grows, and the coverage ratio a bank would compute before saying yes to either.
Free, and no card. Nothing here is filled in with an industry-average rate — every rate and every guess is yours.
Informational only — not audit, attest, legal, tax, or investment advice. This is arithmetic on the figures you enter; it is only as good as they are.
Why equity is the one that's easy to underprice
A loan comes with a monthly bill, so its cost is impossible to ignore. Selling a piece of the business for the same cash comes with no bill at all — until the business grows, and that piece turns out to be worth far more than the check that bought it. This tool prices both the same way: what a loan costs in interest over five years, against what that percentage of the business could be worth over the same five years, at the growth rate you actually expect.
Beneath that: the two paths priced as annualized rates rather than dollars, and the debt service coverage ratio a bank would compute in a bad year — the question a lender is trained to ask before either loan gets approved.
Frequently asked questions
Why is the cost of the loan a single number but the cost of equity a range?
Because a loan rate is a real, quotable figure — a lender either offers it or doesn't. What a stake in the business will be worth in five years depends on how fast the business grows, and nobody can honestly supply a single growth rate for their own company. The range shows both ends rather than picking one.
Where does the 'cost of equity' percentage in the comparison come from?
It's the same growth range you gave for the headline, not a second number. If the business's value grows at a given rate, the investor's stake — a fixed share of that value — grows at the same rate. That is the annualized cost of the equity to the business, so this tool doesn't ask for it twice.
Why doesn't this tell me what a bank generally wants for a coverage ratio?
Because that number isn't this tool's to invent. It computes your own debt service coverage ratio in a bad year, and if you already know the minimum your own lender requires, it tells you whether you clear it. It never substitutes a made-up industry figure for that.
Does this include taxes, control, or what a later funding round might do?
No. It compares raw dollar cost and a coverage ratio — not the tax treatment of interest or a sale, not voting rights or control that can come with an equity stake, and not dilution from any round after this one.
Do I need an account?
No. Every figure here is free with no email wall. Signing in only keeps the result so a later run can show you what moved.