What are the differences between equity and debt financing?

What are the differences between equity and debt financing?

Equity financing involves raising capital by selling shares of your company, while debt financing means borrowing money that must be repaid with interest.

What are the advantages of equity financing?

Advantages of equity financing include no repayment obligation, access to a broader network of investors, and potential for business growth.

Are there any downsides to equity financing?

Yes, downsides include dilution of ownership, potential loss of control, and the need to share profits with investors.

How does debt financing work?

Debt financing involves borrowing funds from lenders, which you repay over time with interest. It's often structured as loans or bonds.

Which option is better for startups?

It depends on the startup's situation. Equity financing is often preferred for high-growth startups, while debt may suit those with steady cash flow.