Question

.Explain the diffrence between equity finance and debt finance with example?
Note; by which one sales bonds and stock to rise money
required short answer

Answer 1

Debt Financing

In debt financing, you borrow money from an outside entity to fund your business. You owe the money, interest, by a designated period. Banks typically issue debt financing. When you use debt financing, you would maintain your business ownership and the Lender of debt doesn’t have a say in business decisions or a part of your profit.

Example:

Commercial bank loans- It is difficult for startups to get business bank loans unlike established businesses. To get a commercial bank loan, you need a solid business plan, a good small business credit score, and collateral.

Equity financing

Equity financing is money paid to your business by an outside entity. The funds come from an investor and not a lender. With equity financing, you do not have to make repayments or pay interest. Instead of paying back a loan, you share your profits with the investor and the investor gains some ownership of your business by investing as when you use equity financing, you issue the investor shares of equity in your business. The number of shares issued be proportional to the amount of money invested.

Example:

Venture capital

Venture capitalists provide investments for new, rapidly growing companies. Venture capitalists have strict rules for investing, so their funds are not available to many small businesses. Because the companies they invest in pose higher risks, they expect to receive a larger return.