DEBT VS. EQUITY: KNOW
YOUR OPTIONS
Before you ever ask an investor for money, you
need to understand how the capital game
works.
Debt funding means you borrow money and
agree to pay it back with interest. This includes
loans, lines of credit, and other forms of
financing. It keeps you in full control but puts
the burden of repayment on your shoulders.
Equity funding means you exchange a
percentage of ownership in your business for
capital. You don't repay the money, but you do
give up some control and share future profits.
It can be a powerful growth lever when used
strategically.
Neither is right or wrong; it depends on your
goals, your business model, and your timeline.
But here’s what’s critical: knowing how to
position your business so either option is
available to you.
HOW TO KNOW IF
YOU'RE INVESTOR
READY
Equity funding sounds exciting, but it’s not for every
business or every founder. You need to assess your
traction. Investors want to see proof like consistent
revenue, user growth, partnerships, or a validated
concept with paying customers. You must know your
numbers, including clear financial statements,
forecasts, and an understanding of your burn rate,
profit margins, and break-even point. Understanding
your valuation is crucial. What is your business worth
today and what could it be worth in three to five
years? Your valuation must align with the amount
you're raising and the equity you're offering. And
finally, you need to be clear on what you want. How
much do you need, what will you use it for, and what
does the investor get in return? Clarity is currency.
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