Running or starting a business is never a child’s play for obvious reasons. Apart from the hard work and strategies that go into commencing the company, having necessary funds is important as well. As a small business owner, you have a few options to choose from when it comes to finances. Out of the possibilities, business loans, debt financing and equity financing work best for small business owners. Let’s find out which is the most suitable for you in the below section.

Debt Financing vs. Equity financing – which works well for business owners?

Criteria	Debt financing	Equity financing
Definition	Debt financing is the type of funding where you avail loans from the lender with an agreement to pay back in equal installments.	Equity financing means selling the shares of the company to investors who will take part in profits once the business turns successful.
Risk	The risk factor is high as the collateral is with the lender, and missing out on repayments can result in the taking over of assets by the lending institution.	Equity financing is practically risk-free for business owners as the investors take the risk here.
Control	As a business owner, you have full control of your business since there is no control from the lender’s end once the loan is paid	You have lesser control and need to discuss with your investors on significant decisions
Difficulty level	Since most lenders provide business loans, getting loans might not be too difficult	Getting an investor can be tedious

Conclusion

Based on the above criteria, a business owner can decide on choosing the best option and apply for a loan with the appropriate business loan documents.

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