Finding a way to finance your business’s growth is vitally important, but it’s not necessarily a simple thing to do. Each option has pros and cons, and you should consider all of them carefully before deciding how, when and how quickly to grow your business. When considering debt and equity financing, realize it’s not necessarily an either/or decision – you could use both. Striking the right balance between the two is often the best solution.
Debt financing typically involves taking a loan from a bank or other financial institution.
The main alternative to debt is equity financing, which frees a small business owner from owing money. But equity financing comes with some loss of control as you seek to expand your business.
Venture capital is a common form of equity financing. It can be suitable for fairly young small to midsize companies with good growth potential.
Leveraged finance refers to a heavier-than-normal amount of debt financing. This typically takes a different form than a bank loan or line of credit.