Whether you’re planning to launch a startup or want to expand your business, you are going to need money. Debt and equity financing are two different financial strategies you can opt for. Incurring debt entails borrowing money for your business, whereas gaining equity means injecting your own or other stakeholders cash into your company.
Quite a few business owners are reluctant about borrowing from a financial institution, as it means cut in cash profits. But it could be a good option so long as you have sufficient cash flow to pay back the loans, plus interest.
Small business owners often opt for equity financing because they are not sure about qualifying for a loan, or they dont want to part with cash profits to service the repayment. Investors and partners can provide equity financing.
Advantages of debt financing:
You do not have to part with any ownership or future profits of your business. Your lender has no control in how you run your business.
You can keep your business profits in the company, and enhance the long term value, or use those profits to pay a return...