Debt Financing vs. Equity Financing: Finding the Right Fit for Your Business
When it comes to raising funding for your business, most options fall into one of two categories:
Debt financing or equity financing.
While both are powerful tools to help you to reach your goals, they come with different advantages and disadvantages.
Let’s take a look at the pro’s and con’s of both!
A Quick Primer on Debt Financing and Equity Financing
Before we get into the subtler aspects of these two forms of financing, it’s important to highlight a major difference in how they work.
- When you use debt financing to secure funding for your business, you’ll pay back the loan (including interest) using cash flows over a set period.
- When you use equity financing to secure funding for your business, you’re trading a portion of your ownership rights, profits and control of your business to another party for the funds.
With this important distinction out of the way, let’s move on to the comparisons…
Which Funding Source is Right for Your Goals?
Experts agree that for most businesses, a mix of both equity and debt financing is often ideal. This allows you to keep cash flows clear while maintaining growth. As with many aspects of running a successful business or investment project, it’s about finding the balance that works for your current needs while supporting your future goals.
If you’re looking for ways that debt and equity financing can help your business, UT Financial Services, LLC, has helped clients secure the capital needed to succeed for more than 20 years. Contacting one of our analysts is a simple way to assess the options available to reach your goals. Explain your needs and we’ll scour our extensive networks of financial groups and private lenders to find you the funding you need.
This website and blog is a publication of UT Financial Services, LLC. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.
Purpose of this blog is to give general education and information about investing and business financing. Information on this website and blog do not involve the rendering of personalized investment advice. No content should not be construed as legal or financial advice.
Consult a professional advisor before implementing any of the options presented.
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