Guide · Debt

How to compare debt offers

Compare every offer on one number: the yearly rate implied by every dollar in and out. The headline rate leaves out fees, the final payment and warrants. In our worked example, they turn a “12%” venture debt offer into 23.7% a year.

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Updated 25 October 2026 · Educational, not financial advice

The one number to compare

Write each offer as monthly cash: what you actually receive at close, every payment after it, the final payment, any fee for repaying early, and what the lender’s warrants are worth if your company does well. Then find the monthly rate at which those payments are worth exactly what you received, and turn it into a yearly rate:

All-in cost a year = (1 + monthly rate)¹² − 1

That rate, the internal rate of return of the offer’s cash flows, is the only like-for-like number across a term loan, venture debt, flat-fee financing and revenue-based financing. A lower headline rate can still be the dearer loan.

How “12%” becomes 23.7%

The venture debt offer in our worked example: $2M over 36 months, 6 months interest-only, 12% interest charged monthly plus 2% added to the balance (PIK), a 2% fee and $25K of closing costs, a 6% final payment, and warrants worth 10% of the loan.

12% charged monthly12.7%

+ PIK interest+1.8 → 14.5%

+ fee and closing costs+2.3 → 16.8%

+ final payment+2.8 → 19.6%

+ warrants, at a 2× exit+4.1 → 23.7%

All in, a year23.7%

Each step adds one cost to the cash flows and recalculates the yearly rate. Warrants are valued at a $40M exit for a company worth $20M today; at no exit they cost nothing, at a bigger one they cost more.

Four offers on one scale

The same worked example, with a bank loan, flat-fee financing and revenue-based financing next to the venture debt.

Offer	Terms	Headline	All in, a year	With warrants
Venture debt fund	$2M, 36 months, 6 interest-only, 2% PIK, 2% fee + $25K, 6% final payment, warrants 10% of the loan	12%	19.6%	23.7%
Bank term loan	$1.5M, 36 months, 1.5% fee + $20K, 5% final payment, warrants 8% of the loan	9%	14.5%	18.6%
Flat-fee financing	$1.5M, a 12% fee, repaid over 18 months	12% fee	15.7%	15.7%
Revenue-share financing	$500K, repay 1.12× from 15% of $180K monthly revenue (about 21 months)	1.12× cap	13.6%	13.6%

The 9% bank loan costs more than the 12% flat fee once its fee, final payment and warrants count. Revenue share is cheapest here only because revenue is flat: if revenue grows, you repay sooner and the yearly cost rises. Cheapest isn’t the whole answer either: check the loan is big enough and long enough for the job.

Four costs the headline leaves out

Fees. Taken at close, so you receive less than you borrow: $1.935M of a $2M loan in the example.
The final payment. A percentage of the loan due at the end, often 2–7%. It adds 2.8 points here.
Warrants. The right for the lender to buy shares cheaply. They cost nothing if the company fails and the most if it does well: $200K at a $40M exit in the example.
Timing. Interest-only months, interest added to the balance (PIK), fees for repaying early, and payments tied to revenue all change when the cash goes out, and so the yearly cost.

What’s normal in 2026

Our reading of public data as of October 2026 (sources below). Use it as a sense check, not a quote.

Type	Typical cost	What to look for
Venture debt fund	About 13–16% a year all in, before warrants	Warrants 5–15% of the loan. Fee 1–2%. Final payment 2–7%. 6–18 interest-only months. 36–48 month term. Prepayment fee stepping down, like 3/2/1%. Size: 20–35% of your last round.
Bank venture loan	Base rate + 1–3%; about 9–12% a year all in	Final payment about 5%, prepayment about 1%, warrants 0–5%. Expect to bank with them and keep most of your cash there.
Revenue-based financing	1.1–1.5× cap; about 16–35% a year	2–10% of monthly revenue. A 10% fee over 12 months is about 19.5% a year, not 10%. Watch for no discount on early repayment.
Invoice or receivables finance	1–3% per 30 days; about 14–35% a year	80–95% of the invoice advanced. Watch for monthly minimums, long contracts and recourse you didn’t price in.
Merchant cash advance	Factor 1.15–1.5; often 60%+ a year	Repaid daily or weekly from sales. Avoid personal guarantees and taking a second advance to pay the first.
Fintech asset-backed facility	About 12–16% for a first facility	75–92.5% advance rate, so you fund 7.5–25% yourself. Base rate + 4–6% once scaled. A parent guarantee, if any, capped at about 10%.

Before you sign

Know the job before the price. How much you need, for how long, and what the money will earn. A cheap offer that’s too small or too short doesn’t do the job.
Check it pays for itself. If $1 of the loan earns less gross profit a year than the loan’s all-in cost, it makes you poorer however cheap it looks.
Get two term sheets. Lenders move most when they know you have another offer.
Count only committed money. Tranches that depend on targets, and lines the lender can refuse to renew, may not be there when you need them.
Be ready to report before you draw. Lenders expect monthly accounts, a cash forecast and covenant checks on time; a late report can be a default.
Draw what you’ll use. Fees and interest on cash sitting idle are pure cost. Ask for fees only on what you draw.
Get the security and consents reviewed. Have a lawyer check the security, the consents and the information rights. These outlast the rate.

Run your own offers

The Debt Offer Comparator does all of this on your numbers: every offer on one yearly cost, the month-by-month payments to check against the lender’s schedule, and what to push back on. Free compares two offers. Pro, a one-off $39, compares up to four, adds revenue share and renewable lines, scenarios, and Excel with live formulas.

Open the Debt Offer Comparator Or: should you borrow or raise?

Sources

The worked example’s numbers come from the Debt Offer Comparator’s example offers. Educational estimates, not financial, legal or tax advice. Always check against your lender’s schedule and the signed agreement.