Knowledge Base

Equity vs. debt - How to start up successfully

22d ago | By: FDS

Equity and debt are two essential elements to consider when starting a business. Equity is the money a business receives from its own resources, while debt is the money borrowed from outside sources such as banks or investors.

Equity is important to start a business because it lowers the risk a business takes when it borrows. Since equity does not have to be repaid, there is no risk that the company will have to file for bankruptcy if it cannot repay its debts.

Debt capital is also important because it allows companies to invest in expansion, develop new products, and enter new markets, allowing them to grow and generate more revenue.

Therefore, when starting a business, entrepreneurs should consider both equity and debt. It is advisable to raise equity first to reduce risk and build a solid foundation. Subsequently, debt capital should be considered to help the company grow.

Like (0)