Written by Steve Ive – Investec
When it comes to debt vs. equity, there’s no outright winner – the best solution for you will depend on your business and the challenges ahead. You should be wary of anyone who tries to steer you down one path without looking at the full range of options available to you.
For some businesses, debt funding has significant advantages over equity.
The most obvious is that debt funding does not involve dilution of ownership – that includes control and profits. Put simply, when you take equity funding you’re giving up a share of your business. It’s worth really thinking about how you’d feel about bringing someone new into your firm, who may have strong views about how it’s run.
That can be an advantage, but if you want to retain your independence, debt funding is likely to be a better option.
The second key advantage is that it’s generally less complex. Any lender worth its salt will want to do thorough due diligence on your business, may take security and will maintain a keen interest in the business’s performance, but that’s a world away from the complexities of raising equity.