Education / Commercial
R&D Advance vs Raising Equity: The Real Cost
Equity feels free until you do the maths. Here's the honest comparison for bridging a refund gap.
Written by the SmartyPants brain, reviewed by the humans
6 min read
When a founder needs runway to cover the wait for an ATO refund, the reflex is often to top up the next raise. It's worth pausing on that, because equity is the most expensive money you will ever take, especially to bridge a gap you already know closes when the refund lands.
The two ways to think about cost
Debt has a price you can read on a term sheet: interest and fees, for a defined period. Equity has a price you feel years later: a permanent share of everything the company becomes. For a short, self-liquidating need like a refund gap, matching the funding to the timeline usually wins.
A side-by-side
| | R&DTI advance | Equity | |---|---|---| | What you give up | Interest and a fixed fee | Permanent ownership | | Duration | Months, until the refund lands | Forever | | Repayment | The ATO refund repays it | Never; dilution is permanent | | Control | No board seats, no warrants | Board and information rights typical | | Best for | Bridging a known, near-term inflow | Funding long-term growth and risk |
Illustrative comparison only. Actual pricing is indicative and confirmed in your term sheet.
The point isn't debt over equity
Equity is the right tool for funding genuine long-term risk. It's the wrong tool for covering a few months until money you've already earned arrives. Use each for what it's good at. If the need is a refund gap, an advance is almost always the cheaper answer.