Which is better from the perspective of the company seeking funding, debt financing or equity financing...

Which is better from the perspective of the company seeking funding, debt financing or equity financing
How are interest rates determined on business loans?

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Expert Solution

7. Debt financing is better from the perspective of the business:

As debt financing is cheap and does not lead to a loss of control on the other hand , equity financing is dilutive in nature and leads to a loss of control, it is a expensive form of raising finance comparison to debt.

8. Interest rates on business loans depends on :

The credit score of the person taking the loan: if the credit score of the business owner is low, then the rate of interest will be high.
The monthly turnover of the business
The collateral given for the loan: secured business loans will carry a cheaper rate of interest than the unsecured business loans.
The nature of the business: some types of business are more secure than the others. A startup firm is usually considered a risky venture.
Time the business was running for: if the tenure of the for which the business was running is high, then the rat of interest will be low.

Keeping these factors in mind, a appropriate rate of interest for the business loan is determined.

jeff jeffy answered 7 months ago

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