Debt buys cash today and creates a repayment obligation tomorrow.
Venture debt can increase the cash available between equity rounds. Its useful runway depends on principal repayments, fees and the operating cash consumed while the loan is outstanding. This model compares cash at each month-end with and without a single new draw.
Warrant coverage is shown separately from debt cash cost. A coverage amount determines a share count under an explicit strike-price convention; it is neither an equity ownership percentage nor the fair value of the warrant. Full-exercise dilution is a capitalization scenario, without a prediction that exercise occurs.
The formula, made clear.
- Cash-out month
- First opening or month-end balance at or below zero, limited to the debt maturity horizon.
- Runway extension
- Difference between the two first cash-out months only when both occur within the horizon.
- Warrant dilution
- Percentage reduction in existing holders’ ownership on full exercise of the newly modeled warrants.
Put the numbers in context.
$1,000,000.00 borrowed with a $10,000.00 upfront fee adds $990,000.00 to opening liquidity. At 5% coverage and a $2.00 strike it creates 25,000 warrants; against 10 million existing fully diluted shares, full-exercise dilution is about 0.249%.
| Input | Example value |
|---|---|
| Loan principal | $1,000,000.00 |
| Nominal annual interest rate | 12% |
| Maturity | 36 months |
| Initial interest-only period | 12 months |
| Amortization payment count | 24 payments |
| Upfront cash fee | $10,000.00 |
| Maturity cash fee | $20,000.00 |
| Cash before the debt draw | $1,200,000.00 |
| Monthly operating net burn | $100,000.00 |
| Warrant coverage | 5% |
| Warrant exercise price per share | $2.00 |
| Fully diluted shares before new warrants | 10,000,000 shares |
| First financed cash-out month within maturity | 18 |
What this calculation assumes
Single draw at time zero, monthly fixed-rate cash-pay debt and constant net operating burn through maturity. No later equity raises, covenant enforcement, minimum cash covenant, undrawn commitment, refinancing or forecast beyond maturity. Negative balances represent unfunded needs. Warrant exercise proceeds and warrant fair value are excluded from liquidity and effective debt cash cost; no exercise date, future stock price, valuation model, cashless exercise, tax or contractual adjustment is assumed.
What to consider next.
Review the maturity month and the funding gap, then test a higher burn scenario. Transfer only debt terms or named compatible assumptions into another calculator; an uneven debt schedule is not a constant monthly burn.
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