The Scenario
A growing SaaS startup needs to raise $3,000,000 to fund product R&D and scale global sales. The founders are evaluating two term sheets: Option A is a 5-year bank term loan at a 9% interest rate with no equity dilution. Option B is an equity investment of $3,000,000 in exchange for 20% ownership of the company. The startup's current valuation is $12,000,000 pre-money, and they expect net income to grow from $500,000 to $2,500,000 over the next 5 years.
The Brief
Perform a comparative financial analysis of the two options. Model the debt service requirements, compile a cap table dilution schedule under Option B, and calculate the founders' remaining equity value after 5 years under both scenarios.
Deliverables
- Debt amortization table for Option A showing annual principal, interest payments, and remaining balance.
- Cap table dilution schedule showing post-money ownership percentages for Option B.
- Founder return on equity (ROE) and remaining equity valuation comparison at Year 5.
- A recommendation report (max 400 words) summarizing the strategic trade-offs between debt interest burdens vs equity dilution.
Submission Guidance
Provide your analysis in clean Markdown. Use tables for the cap table and debt amortization schedules. Back your recommendation with quantitative output.
Submit Your Work
Your submission is graded against the rubric on the right. If you pass, you get a public Badge URL you can share on LinkedIn. There is no draft save, so work offline first and paste your finished response here.