Debt Offer Comparator: Venture Debt, Term Loan & RBF

The rate on the first page of a term sheet is rarely what you pay. Lenders also charge an upfront fee that comes out of the money you receive, sometimes a final payment on top of the amount, and sometimes warrants, which give the lender the right to buy shares later. Each one makes the loan cost more than the quoted rate suggests, and each is easy to overlook when you are comparing offers that are built differently.

This comparator turns every offer into a stream of monthly cash: the money you actually receive on day one, then every payment you make after that. It then finds the single yearly rate that makes those two sides equal. That figure is the all-in annual cost, and it is the only number on which a term loan, an interest-only loan and a revenue-based advance can be compared fairly.

amount received = amount − fees (+ GST on fees) all-in annual cost = the yearly rate at which every payment you make, discounted back, equals the amount you received

Term loan (equal monthly payments)

You pay the same amount every month, part interest and part principal, until the loan is cleared. An optional interest-only period at the start lowers early payments and raises the total interest.

Interest-only with a final payment of principal

You pay interest each month and return the whole amount in the last month. This is the usual shape of venture debt. Cash stays with you longer, but the last month is large.

Revenue-based financing

You receive an advance and repay a fixed percentage of each month's revenue until a total cap, such as 1.2 times the advance, is reached. There is no interest rate. The cost is the cap minus the advance, and the yearly rate depends on how fast you pay it back.

Revenue-based offers are the ones people misread most. A 1.2 times cap always means the same rupees of cost, but if your revenue is higher you repay sooner, so the same rupees are paid over fewer months and the yearly rate climbs. The comparator asks for your monthly revenue and expected growth for exactly this reason.

Even with no fees, 12% a year paid monthly costs a little more than 12%, because interest paid earlier is money you no longer have. That small gap is why the comparator shows an effective rate, not just the quoted one.

Neither example is a market rate. They show how the maths works so you can replace the inputs with the figures from your own term sheets.

A warrant lets the lender buy shares in your company later, usually at today's price. Warrant coverage is quoted as a percentage of the loan: 10% coverage on ₹1,00,00,000 gives the lender the right to buy ₹10,00,000 worth of shares at that price. If the share price rises, the lender's gain is a cost to you and your investors, even though no cash leaves the company.

warrant cost = amount × coverage % × (share price growth − 1)

The comparator counts that gain as paid at the end of the loan. You supply the growth guess: 3 means you expect the share price to triple by exit. Try 1 (no growth), 2 and 3 to see how sensitive the offer is. A venture-debt offer that looks cheap at a flat share price can overtake a bank loan once the company does well.

Upfront fees are usually deducted from the payout, so you borrow the full amount but receive less. The comparator takes the fee, any other charges and GST on them off the amount you receive. If the lender charges GST on its fees and you can claim it back as input credit, leave GST at 0. If you cannot claim it, enter the rate shown on the lender's invoice.

• What is the exact upfront fee, and is GST charged on it?
• Is there a final payment, exit fee or success fee at the end?
• Are there warrants, and what is the coverage and strike price?
• Is there a prepayment charge if you repay early?
• For revenue-based offers: what exactly counts as revenue, and is there a minimum monthly payment?
• Are there covenants, such as a minimum cash balance, that can trigger early repayment?

• Comparing quoted rates when the offers have different fees, final payments or warrants.
• Treating a revenue-based cap as a flat cost without checking how quickly you would repay it.
• Ignoring that the upfront fee is taken from the payout, so you receive less than you borrowed.
• Leaving warrants at zero because no cash is paid. Dilution is a cost.
• Choosing the lowest monthly payment and not looking at the total repaid.
• Forgetting to check the numbers against the lender's repayment schedule before signing.

Debt is the right tool when you have predictable revenue and a clear use for the money. Before you take it, check whether a grant, subsidy or credit can cover part of the need, because those cost you nothing to repay and nothing in equity. Startup Grants India lists equity-free grants, subsidies and cloud credits for Indian startups, and many founders find that a grant covers the gap that made debt look necessary.

If you do borrow, compare at least two offers on the all-in annual cost, read the repayment schedule, and have the agreement reviewed. This tool gives estimates to help you compare. It is not financial, legal or tax advice, and the lender's schedule and the signed agreement are what count.