What are the differences between equity sharing and debt financing?

What are the differences between equity sharing and debt financing?

Equity sharing involves giving up a portion of ownership in exchange for capital, while debt financing means borrowing money that must be repaid with interest.

Which option is better for startups?

It depends on the startup's goals. Equity sharing can provide more flexibility and less immediate financial pressure, while debt financing allows founders to retain ownership.

What are the risks associated with each?

With equity sharing, you risk losing control and profits. Debt financing carries the risk of repayment obligations, which can strain cash flow.

Can you give examples of companies that used each method?

Sure! Companies like Uber used equity financing, while Tesla has utilized debt financing through bonds.

How do I decide which method to use for my business?

Consider your business model, growth stage, and financial health. Consulting with a financial advisor can also help.