Debt Vs. Equity Calculator
To expand, it’s necessary for business owners to tap financial resources. Business owners can utilize a variety of financing resources, initially broken into two categories; debt and equity.
“Debt” involves borrowing money to be repaid, plus interest, while “equity” involves raising money by selling interests in the company. Essentially you will have to decide whether you want to pay back a loan or give shareholders stock in your company. Adding venture debt to the equation can be more cost efficient than giving away equity in the long run. This calculator allows you to compare the cost of pure equity to equity plus debt.
- Enter the year, the investment you expect and your expected enterprise value.
- Go to the Debt + Equity section and enter the percent of the financing you would like to take as debt.
- Enter the annual interest rate.
The option which provides the founder with greater value will be highlighted in green. Note that there are a number of assumptions in this model to be able to provide a quick and reasonably accurate estimate.
For a detailed calculation for your specific circumstance