Mighty Digits on LinkedIn: Debt vs Equity Both can fund your business But each mean something… (2024)

Equity & Debt

Debt vs EquityBoth can fund your businessBut each mean something completely different from the otherLet’s start with some definitions…➡️ What does it mean to raise Debt?Raising debt means you received money with the expectation that you will pay back the amount, almost often with interestIt is a liability (since it’s something you owe to a creditor)and is CAPPED…that is, there is an exact amount that you owe➡️ What does it mean to raise Equity?Raising equity is when you receive money, but this time in exchange for ownership in your companyThis means that you have a type of liability to the new owner, but this time it’s UNCAPPED…as it involves giving a share of the profit & loss / sale of the company awayThis would show up in the Owner’s Equity section of your balance sheet➡️ What are the Pros & Cons of raising debt?Raising debt can be a great way to inject capital into your business if you are comfortable with repaying the amounts with interestBusiness owners who are bullish on the future of their business may have no problem raising debt, since they feel confident they will be able to use that capital to generate an even stronger return than what they will pay in interestThe cost of the interest + the schedule in which you agree to repay the loan however may catch up with you, leaving you in a difficult position if things don’t go as planned➡️ What are the Pros and Cons of raising equity?Raising equity can often times be a great way to raise capital without having to repay the amounts…let alone the lack of interest paymentsOften times an equity owner will also be a proud contributor to the management of the company, yielding the company both with capital as well as expertiseIt can come at a steep cost however, as you no longer have as big of a pie to share in the profitsEquity owners may also get voting rights, ultimately controlling the direction of the company...which can cause problems if you are not aligned➡️ When should you raise debt, and when should you raise equity?While every business is subjective, our 2 cents are:Raise debt when you feel confident that you have a proven formula for generating a large ROI with the capital, and the interest is lowRaise equity when you feel there is a fair valuation for the company, and you are aligned with the person who wants to become an equity holder in your businessThat’s our take on raising debt vs equityWhat would you add?PS: Looking for an expert to help guide you on raising debt vs equity? We can help you with that and much more..Learn more over here: https://bit.ly/47dbyWR

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Helpful for Finance Professionals.Simple and lucid definition of Debt and Equity, even you can get good insights just go through some of the finest comments from the Finance Experts #learninganddevelopment #financeandaccounting #debt #equity #definition

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Debt vs EquityBoth can fund your businessBut each mean something completely different from the otherLet’s start with some definitions…➡️ What does it mean to raise Debt?Raising debt means you received money with the expectation that you will pay back the amount, almost often with interestIt is a liability (since it’s something you owe to a creditor)and is CAPPED…that is, there is an exact amount that you owe➡️ What does it mean to raise Equity?Raising equity is when you receive money, but this time in exchange for ownership in your companyThis means that you have a type of liability to the new owner, but this time it’s UNCAPPED…as it involves giving a share of the profit & loss / sale of the company awayThis would show up in the Owner’s Equity section of your balance sheet➡️ What are the Pros & Cons of raising debt?Raising debt can be a great way to inject capital into your business if you are comfortable with repaying the amounts with interestBusiness owners who are bullish on the future of their business may have no problem raising debt, since they feel confident they will be able to use that capital to generate an even stronger return than what they will pay in interestThe cost of the interest + the schedule in which you agree to repay the loan however may catch up with you, leaving you in a difficult position if things don’t go as planned➡️ What are the Pros and Cons of raising equity?Raising equity can often times be a great way to raise capital without having to repay the amounts…let alone the lack of interest paymentsOften times an equity owner will also be a proud contributor to the management of the company, yielding the company both with capital as well as expertiseIt can come at a steep cost however, as you no longer have as big of a pie to share in the profitsEquity owners may also get voting rights, ultimately controlling the direction of the company, which can cause problems if you are not aligned➡️ When should you raise debt, and when should you raise equity?While every business is subjective, my 2 cents are:Raise debt when you feel confident that you have a proven formula for generating a large ROI with the capital, and the interest is lowRaise equity when you feel there is a fair valuation for the company, and you are aligned with the person who wants to become an equity holder in your businessThat’s my take on raising debt vs equityWhat would you add?Let us know by joining in on the conversation in the comments below 👇Hey 👋 - thanks for reading! #business #share #money #businessowners #payments #future #management

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✌️ Both DEBT and EQUITY are essential components of the capital structure. ✅ The drastic changes in interest rates over the last two years have necessitated optimizing the capital structure. 😡 It is a significant concern for CFOs. Interest impacts free cash flows are significant, and equity deployment does not provide adequate returns due to the downturn in enterprise and retail customer spending. Looking everywhere to reduce cost ✂️👉 For a CFO to ensure success, he must focus on optimizing the capital structure and minimizing interest rate impact through risk management.

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Debt vs EquityBoth can fund your businessBut each mean something completely different from the otherLet’s start with some definitions…➡️ What does it mean to raise Debt?Raising debt means you received money with the expectation that you will pay back the amount, almost often with interestIt is a liability (since it’s something you owe to a creditor)and is CAPPED…that is, there is an exact amount that you owe➡️ What does it mean to raise Equity?Raising equity is when you receive money, but this time in exchange for ownership in your companyThis means that you have a type of liability to the new owner, but this time it’s UNCAPPED…as it involves giving a share of the profit & loss / sale of the company awayThis would show up in the Owner’s Equity section of your balance sheet➡️ What are the Pros & Cons of raising debt?Raising debt can be a great way to inject capital into your business if you are comfortable with repaying the amounts with interestBusiness owners who are bullish on the future of their business may have no problem raising debt, since they feel confident they will be able to use that capital to generate an even stronger return than what they will pay in interestThe cost of the interest + the schedule in which you agree to repay the loan however may catch up with you, leaving you in a difficult position if things don’t go as planned➡️ What are the Pros and Cons of raising equity?Raising equity can often times be a great way to raise capital without having to repay the amounts…let alone the lack of interest paymentsOften times an equity owner will also be a proud contributor to the management of the company, yielding the company both with capital as well as expertiseIt can come at a steep cost however, as you no longer have as big of a pie to share in the profitsEquity owners may also get voting rights, ultimately controlling the direction of the company, which can cause problems if you are not aligned➡️ When should you raise debt, and when should you raise equity?While every business is subjective, my 2 cents are:Raise debt when you feel confident that you have a proven formula for generating a large ROI with the capital, and the interest is lowRaise equity when you feel there is a fair valuation for the company, and you are aligned with the person who wants to become an equity holder in your businessThat’s my take on raising debt vs equityWhat would you add?Let us know by joining in on the conversation in the comments below 👇

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Debt vs Equity

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