What is Equity Financing vs Debt Financing?
If you are starting a business and are looking at your financing options, there are two types of financing available: equity financing and debt financing. Debt FinancingDebt financing means taking out a loan (money that is to be paid back over a certain period of time, usually with interest). Debt financing is either short term (the loan is to be repaid in less than a year) or long term (the loan is to be repaid in more than a year). Lending parties will also look closely at the business's debt-to-equity-ratio. When taking out a business loan, the only obligation of the business is to repay the loan according to the terms that were agreed upon.
The lending party does not gain ownership in the business. Many lending institutions require the owner(s) of smaller businesses to personally guarantee the loan. In such a case, the commercial loan becomes the same as a personal loan. If you are starting a home based business and are looking to take out a commercial loan, then you will be definitely be asked to personally guarantee the loan. Advantages of Debt FinancingThe biggest advantage of debt financing is that the lending party does not gain any part of ownership of your business and your only obligation to lending party is to repay the debt.
Also, repayment of the loan is typically a fixed expense, according the terms of the loan. Dis-Advantages of Debt FinancingThe biggest dis-advantage is that the business will not have all of its cash flow available to do business. Also, the interest that is owed can be high. Equity FinancingEquity financing is when you (the business owner) sell an ownership interest in your business in exchange for money. The business owner and the investor(s) shares the business and the risks that come with it.
Equity financing is a form of financing your business without incurring debt. With equity financing you don't have to take out a loan since the funding is already coming from an investor in exchange for a piece of ownership in the business. Many small and growth-stage businesses use equity financing as a source of funding. There are many sources of equity financing including non-professional investors such as family and friends, employees, etc. The most common source, however, are professional investors known as venture capitalists.
Venture capitalists are looking for businesses with the potential to grow, thereby increasing the value of their investment. They do not expect to see an immediate return on their investment. Most venture capitalists focus on certain types of businesses such as, start-ups, specific industries (health, technology, service) or technologies. Advantages of Equity FinancingThe major advantage of equity financing is that the cash flow that would have been used to repay the loan, can be used to grow the business. Dis-Advantages of Equity FinancingThe major dis-advantage of equity financing is the loss of interest of ownership of your business and also the possible loss of complete control that can accompany a sharing of business ownership with investors.
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Jose is the owner/operator for www.aguidetostartingabusiness.com and www.allhomebasedbusinessideas.com3 Steps to Equipment Financing Success.
Mortgage Brokers interested in adding equipment financing to their revenues can do so by following 3 easy steps.
Starting a commercial equipment financing business can be a doubly successful endeavour for mortgage brokers because it can generate a new income stream as well as open up more doors for building their existing mortgage business. Also, financing
equipment can be a good stepping stone for a mortgage broker into the more complicated world of project & commercial property finance. With good commissions available, this area should be of interest to the expanding mortgage broker's business.
While the thought of commencing a new business venture can be a daunting one success will come from having sound procedures and practices. A small amount of work initially will quickly help you to determine if there is a business opportunity, and
if there is - how to go about taking advantage of it.
1. Establish your footings.
3 Steps to Equipment Financing Success. 
Financing > 3 Steps to Equipment Financing Success.
Accounts Receivable Financing
Accounts Receivable Financing and Accounts Receivable Factoring are two terms that are interchangeably used, but there is a major difference between them. Although both refer to the concept of extending cash to an owner of a business in lieu of invoices and other Accounts Receivable, there are differences, no matter how subtle.
First of all, Accounts Receivable Financing is a loan in which the invoices are used as collateral. But this not the case with Accounts Receivable Factoring. Accounts Receivable Factoring is not a loan. It involves the selling of the invoices to the financing company at a rate less than the face value of the invoices.
The financing companies then collect the money at the full face value from the clients. This means the business no longer has the responsibility of collecting the money.
But this is not the case in Accounts Receivable Financing. The process of Financing involves the extension of an advance on the percentage of each...
Financing > Accounts Receivable Financing
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What is Equity Financing vs Debt Financing? The Advantages of Memory Foam Pillows mattress
Financing > The Advantages of Memory Foam Pillows
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Tips for Buying Your PCBuying a PC that's right for you and your family is not all that simple task. More so if you're going to buy an unbranded or an assembled one. But branded or not, you have to get you facts right before you shell out your money. First, why do you want to buy a PC? Is it because almost every one has one these days, or that you have the money to spare. If these are the reasons are that you want to end up spending a lot of money on something you're unlikely to use.
But...
What is Equity Financing vs Debt Financing? Tips for Buying a PC keyboard
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10-Hour OSHA General Industry Safety and Health Program
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ladders What is Equity Financing vs Debt Financing? 10-Hour OSHA General Industry Safety and Health Program
Financing > 10-Hour OSHA General Industry Safety and Health Program
What is Equity Financing vs Debt Financing? plasma tv Financing
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What is Equity Financing vs Debt Financing? skirts Baby Laundry Boutique Celebrates Its One-Year Anniversary Financing
Financing > Baby Laundry Boutique Celebrates Its One-Year Anniversary