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All You Ned To Know About Debt And Equity Financing The success of your startup depends on your capability to secure the right kind of financing. There are different sources of capital and entrepreneurs are always torn between debt and equity financing options. Choosing between lender loans and offering shares in your business can leave you stressed out. In some instances, business owners will opt for one of the two, or they will go for a mix of debt and equity financing. You need to factor in critical aspects when determining capital sources, but you need to know the pros and cons of debt and equity structures up front. Apparently, choosing debt or equity finance depends on what is readily available and the factors affecting business cash flow. Also, business owners will go for either option depending on how they perceive property and decisions making priorities. If you choose equity; you are not under duress to repay the way it is with the debt option. As an entrepreneur, your goals is to see the business growing such that you can offer the investor a share of your returns. Apparently, you don’t have to worry about installments or interest rates that accompany a debt financing option. Simply put equity financing doesn’t burden your businesses and you can channel all the cash towards growth and expansion. You will enjoy the flexibility that equity financing presents but an investor will be available to offer advice and insights needed to keep the venture focused on its growth path. Also, investors will be pooling their money with you and sharing the risk in contrast to a bank that pressures you if you default. Business owners who opt for debt financing over equity have a reason to smile as well.
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Even though debt seems challenging at first, you can get approved for just about any business regardless of its nature or size. With the debt alternative, you have a broad range of loan sources including mainstream and alternative lender. Budding venture owners who. For some reason have a bad credit rating can still get approved when they chose debt financing. Through debt financing you can get approved without collateral or with a bad credit score but you can always skip where you feel the interest rates are too much.
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If you took the debt alternative, ownership lies with you and you can make your decisions at will. Remember, your relationship with the lender ends as soon as you are done with the last installment. Entrepreneurs who go with debt financing will enjoy reduced tax liabilities since the interest paid on loans is tax deductible. Capital acquired through the debt option can be paid back as long as you have a sober repayment plan. If you want money in a hurry, debt financing is the way to go.