The majority of venture funding falls into one of two categories - debt or equity. This quick comparison of debt and equity will help you to understand the pros and cons of each.
The difference between debt and equity funding
Debt is a loan that must be repaid. When you sell a stake in your business, you're getting equity finance. Those are two completely different things. You don't have to choose between either/or. There are times when a combination of debt and equity funding is best for your business. The key is to know what you're getting into before you make a decision.
Which is riskier - debt or equity funding?
The answer is…it all depends. Debt can be riskier if you are not profitable as your debt funder will require to service the loan based on a specific schedule. If not managed well, you could lose more than just your company. Equity financing on the other hand will require you to dilute your shareholding and investors will expect you to turn a healthy profit sooner rather than later.
How can we help you?
Are you ready for funding? We will be kicking off our Funding Program in Jan 2023, which will help assess whether you are investable, help you develop and execute your seed or series A fundraise within 90 days. Keep a look out for the info webinar and feel free to set up a complimentary session to see whether you are a fit for the programme or if we can help you in any other way.
Disclaimer
We do not provide accounting, tax, business, or legal advice. The information provided in this guide is for informational purposes only. Before taking action based on any of the provided content, it is recommended that you consult your own professional advisors.