- Debt and equity financing are two very different ways of financing your business.
- Debt involves borrowing money directly, whereas equity means selling a stake in your company in the hopes of securing financial backing.
- Both have pros and cons, and many businesses choose to use a combination of the two financing solutions.
- This article is for small business owners who are trying to decide if debt or equity financing is right for them.
Unless you have an existing empire of wealth to build on, chances are good that you’ll need some sort of financing in order to start a business. There are many financing options for small businesses, including bank loans, alternative loans, factoring services, crowdfunding and venture capital.
With this selection, it can be difficult to determine which option is right for you and your business. The first thing to know is that there are two broad categories of financing available to businesses: debt and equity. Figuring out which avenue is right for your business can be confusing, and each option has its own pros and cons.