Equity financing involves selling shares of a business for capital, allowing investors to become shareholders without incurring debt, while debt financing entails borrowing funds with a repayment obligation, keeping ownership with the founder. Each option has distinct advantages and disadvantages, including shared risks and expertise in equity financing versus fixed repayment schedules and tax benefits in debt financing. The choice between them should consider control, partnerships, repayment ability, risk tolerance, and growth objectives.

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EQUITY Financing
DEBT Financing vs

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DEBT Financing vs EQUITY Financing
When it comes to financing your business, two primary options often come into play:
equity financing and debt financing and are crucial in determining
the financial future of your business.
They differ significantly in terms of structure, risk, and potential benefits.

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What is Equity Financing?
Equity financing involves selling shares of your business to investors for capital.
Investors become shareholders, sharing ownership and potential profits,
and their funds avoid any incurring debt or repayment obligations.
Selling Shares

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Advantages of Equity Financing
Shared Risk between Founder and Investor
Access to Expertise
No Debt/Repayment Obligations
Potentially Greater Returns for Investors

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Considerations for Equity Financing
Loss of Decision-Making authority
Dilution of Founder’s Ownership

6. What is Debt Financing?
Debt financing means borrowing funds from lenders, like banks or
private lenders, with a repayment commitment over a set time,
including interest. Lenders don't own your business; they become creditors.
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Advantages of Debt Financing
Founder retains ownership and control
Repayment Amount and Schedule is Fixed
Tax Benefits

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Considerations for Debt Financing
Repayment Obligations
Interest Payments
Collateral and Other Personal Guarantees

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Here are few Questions you should ask yourself:
How to decide between Equity and Debt Financing?
How much control are you willing to relinquish?
Are you seeking long-term partners and expertise?
Can you comfortably manage regular loan repayments?
What is your risk tolerance?
What are your growth objectives?

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Conclusion
Equity and debt financing differ in numerous ways,
each with its pros and cons.
Your choice depends on your business's needs and goals.
Evaluate both methods thoroughly, and seek professional
guidance for sound financial decisions.
SALT helps you receive funds from your overseas investors
through TABLE: Our FDI tool.