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All You Ned To Know About Debt And Equity Financing The prosperity of your business depends on your ability to find the ideal financing option. 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. There are pertinent factors to consider when choosing the capital structure but it helps to learn the pros and cons involved in the process. To many, choosing between debt or equity largely depends on what is easily available and the cash flow trends. There are businesses owners who will choose either of the two depending on ownership and decision-making privileges within their ventures. When you take up equity financing, you are not under pressure to pay up fast compared to debt option. As an investor, your objective is to grow the venture and offer investors their share of the profits. With equity, you are not under duress to repay with hefty interest rates that come with bank financing. When you choose equity financing, there is a possibility that the money generated goes into growth and expensing since there is no pressure to pay up fast. Apart from the flexibility that equity offers an entrepreneur, partnering with angel investors will be in a position to offer useful guidance needed to propel the business forward. With investors, you will get the capital and share the risks compared to a lender who repossess you if you default. Venture owners who opt for debt financing have their share of benefits as well.
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Choosing debt financing sounds intimidating, but the good thing is that you can get a loan to do any business irrespective of its nature or magnitude. If you choose debt; you have the prerogative to pick a lender from a wide berth of institutions including mainstream and alternative lenders. If you have a credit score that isn’t impressive, you don’t have to worry about getting loans since alternative lenders are willing to approve you. 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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With the debt finance option, making business critical decision is your prerogative since there are no opposing parties. 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.