Do You Need Equity Financing Or A Debt Financing Option For Your Business?

Businesses can choose what type of funding they need for their daily operations, expansion, buying new equipment, etc. Two types of funding namely debt finance and equity finance are available for businesses. Businesses can borrow money from banks, private entities, and individuals by issuing bonds. They can retain control over their operations when opting for debt financing.

In the equity financing option, the companies sell shares to the general public and institutional investors. The shareholders earn a part of the profits. FIIs or individuals who hold large stakes will have control over the operations and business decisions of that company.

Financing options for small businesses

Small businesses can choose from a variety of financing options, such as factoring services, alternative loans, bank loans, venture capital, and crowdfunding. The companies need to check which option is best for their businesses, depending on the type of business and repayment capacity. Joseph Stone Capital has experienced finance executives who can offer valuable advice for small businesses on choosing the perfect debt financing option or equity financing mode to mobilize funds.

Economic loans from banks

When it comes to borrowing funds under the debt finance option, bank loans are cheaper for small businesses. It is similar to borrowing funds for a home purchase or to pay tuition fees. The companies need to pay the interest along with a part of the principle as per the agreed terms and conditions at specified intervals like monthly, quarterly, or annually.

Small businesses need to offer collateral to obtain low-cost loans from banks. Some of the accepted collateral includes equipment, insurance policies, accounts receivable, real estate, and inventory. The banks will use this collateral to recover their dues if your company defaults on loan payments.

Small business administration loans

Business owners can choose SBA loans, which have the lowest interest rates, from the banking partners of the federal government, for their funding needs. Such SBA loans come with longer repayment terms. However, you need to comply with stricter qualification terms set by the government to get cheaper loans.

Lines of credit for businesses

It allows companies to draw a lump sum to meet their business needs. However, you can withdraw a portion or the full amount and pay interest on the drawn amount only. You need not provide collateral for lines of credit since they are unsecured.

Cash advances from merchants

It is an alternative form of debt financing. It comes with higher interest rates compared to other forms of financing available for small businesses.

Credit cards for businesses

It is similar to personal credit cards. However, business credit cards come with additional features like higher credit limits, lower interest rates, discounts for quick payments, and longer payment options.

Small businesses can also choose an equity financing option to meet their financing needs. You can choose the help of financial experts at Joseph Stone Capital to raise funds by issuing shares to institutional clients and the general public. It charges a fee for offering help in mobilizing funds for business needs.