Equity vs. Debt Financing: Which One is Right for Your Business

When running a small business, you may require extra capital at one time or the other. At such a time, you may be wondering whether to apply for a business loan or bring in an investor. The way you raise funds for your business can have a big impact on its future growth and profitability. So, which option will be best for you? Equity or debt?

Below is an overview of the differences between the two.

Understanding Equity Financing
With equity financing, you offer part of your business to venture capitalists or angle investors. In return, the investors provide some capital. Check out the debt equity companies Glenn Corey .

In some types of businesses and industries, equity is very important. Companies looking to go global and technology startups usually opt for equity financing. It is estimated that between $10 billion and $50 billion equity finance is offered annually in the US by venture capitalists.

Benefits of Equity Financing
You may prefer equity financing for a number of reasons:

o When you attract the right investors, you can benefit from their industry connections, wisdom, great experience and much more. These relationships can last a long time and can be instrumental in the growth and profitability of your business.

o The capital you raise attracts zero interest. Therefore, your business's profits will not have to be set aside to pay debts. This means you will have more cash to grow the business. Get ready to learn about   Credit Control .

o In case the business fails, you will not have to repay the money.

Downsides of Equity Financing

o Compared to other debt financing options, raising equity investment can take quite a long time.

What is Debt Financing?

In simple terms, debt financing refers to borrowing money from a lender. The money has to be paid back to the lender with interest over an agreed future period. If you take a business loan, you will be financing your business with a debt.

Pros of Debt Financing

o When you get a business loan, you are in control of how much the money gets spent. Some lenders may impose restrictions on how to use the loan. However, for the most part, how the financing is spent is up to you.

The above is an overview of equity financing and debt financing. You should carefully consider the pros and cons of each financing option to determine which one will be suitable for your business. You can get advice on the way to go by contacting a debt equity financing advisor or company. Learn more about debt equity  https://www.huffingtonpost.com/daniel-epstein/beyond-debt-and-equity-my_b_5553574.html .