You are small business owner and you want to grow your business at that time need a capital. How to get a Business Capital? There are total 2 types of business funds available. Debt Financing and Equity Financing are both ways to get a business capital for small business owners. While doing business expansion you must know debt financing and Equity Financing. Find the difference between Debt financing and Equity Financing.
Quick Difference between Debt Financing and Equity Financing
- Debt Financing:
Here, Business owners take a loan from lender and then He/she give full amount with interest.
- Equity Financing:
Here, Business owners directly give percentage of business in exchange of capital.
While growing your business, you must choose any one of financing method.
Types of Debt Financing:
- Bank Loan:
When you start any startup then it’s little difficult to get a bank loan. When there is small business then you get a quick bank loan. If your startup have a better and solid business plans then you get bank loan.
- SBA Loans:
There are few SBA Loan programs run by Small Business Administration for growing a small business owners. It’s actually bank loan but SBA took guarantee and they give loan amount to bank.
- Equipment Leasing:
It’s a loan to buy any business equipment. At that time you need to pay a fix amount of money to bank for fix time period. It’s better type of loan to buy equipment.
Types of Equity Financing :
- Private Investors:
Any Person or any Business owners gives some amount for small business owners. Private Investors are not affiliated with any banks.
- Angel Investors:
It’s a group of investors or individuals who are going to put money in startups. They are actually focusing on future plans of startups and expecting more profits.
Debt Vs Equity Financing : Which one is Better?
When you have a strong business model then you must prefer Debt Financing because here you don’t need to share any ownership. But you want to share some risk then you must choose equity finance.
Debt Vs Equity Financing