If you’re starting a business or already running one, it’s inevitable that you eventually run into the issue of what type of financing is best for your company (or better, for your company at a particular stage). There are two primary types from which to choose, and under which all options fall: debt financing and equity financing. 

Financing Using Equity

This is primarily used when you lack the capital for traditional debt financing, or when you’re interested in private investors such as angel investors or venture capitalists. Instead of cash, this option provides funds for a percentage of your business – much like owning stocks in a publicly traded company. 

Crowdfunding is another form of equity financing in which you needn’t worry about fixed payments that may stifle your cash flow. Essentially, you must be prepared to part with a percentage of your business when you are financing using equity – which shouldn’t be a problem with substantial growth. The primary benefit is that you can use the cash exclusively for business growth without worrying about debt; however, you should be prepared to have limited control as a result of the compromise.

Traditional Debt Financing

This is, of course, the usual route – and in many cases, the preferred one. Primarily because with debt financing, you retain full control and ownership of your business – there’s no sharing of the profits. Of course, this also means you have to undertake the full brunt of the debt and start-up costs, with monthly payments that can hamper your growth potential. Via the federal government, you can also take advantage of tax deductions when you assume business debt.

The flip side is that you must pay ongoing fees – irrespective of how poorly the business may be doing. With great power, comes great responsibility – and there are no wealthy angel investors positioned to get you out of a rut. Clearly, your initial state at the beginning of your intended business venture is the primary determinant of whether you opt for debt financing or equity financing.

At Fortis Funding, we offer both debt and equity financing solutions. Contact our offices today to learn more.