{"id":318,"date":"2017-01-12T11:41:04","date_gmt":"2017-01-12T11:41:04","guid":{"rendered":"https:\/\/crowdforangels.com\/blog\/?p=318"},"modified":"2019-11-15T15:11:02","modified_gmt":"2019-11-15T15:11:02","slug":"equity-financing-better-debt","status":"publish","type":"post","link":"https:\/\/crowdforangels.com\/blog\/equity-financing-better-debt\/","title":{"rendered":"What is Equity Financing, and is it Better than Debt?"},"content":{"rendered":"

\"Equity<\/a><\/p>\n

If you\u2019re an entrepreneur looking to get financing for your business, the decision between equity and debt can be tricky. You might have done a lot of work on preparing your business to start getting financed \u2013 no doubt you\u2019ll have a detailed business plan, a sensible valuation, and a good awareness of your target market in preparation for pitching to investors or investment funds. It\u2019s your business, and you should know it well \u2013 but even once you\u2019ve thought carefully about those details, it\u2019s still an open question whether or not equity or debt financing is best for you.<\/p>\n

A lot of entrepreneurs are put off selling an equity stake in their business because they believe that it has a very bright future and want to hold on to as much of it as possible. On the other hand, you might be put off by the idea of going into debt. But investors and investment funds face a similar dilemma themselves \u2013 do they take the fixed return from a debt investment, or do the greater possibilities of equity<\/a> make it more enticing? Whether you\u2019re pitching or investing, here\u2019s what you need to know about equity and debt<\/a> financing.<\/p>\n

Financing Your Business<\/strong><\/h3>\n

Equity financing refers to raising capital for your business through selling shares in the company. It can be tempting for entrepreneurs because it means you don\u2019t have to go into debt \u2013 so in the short term, you receive an injection of capital without having to worry about paying it back. Equity financing also has the benefit of bringing in investors with experience who have a stake in the business, meaning you might have access to their expertise and their networks. While this won\u2019t apply to venture capitalists or traditional investment funds, angel investors with equity in your business will be able to provide invaluable guidance as you move your business forward.<\/p>\n

On the other hand, equity financing does involve losing a share of your business, and entrepreneurs can be reluctant to do that since they believe their business will be a success \u2013 you don\u2019t want to sell shares now if you think that in a few years they\u2019ll be worth a lot more. From that point of view, debt financing is much more appealing.<\/p>\n

Debt financing refers to receiving a loan from investors or investment funds. While it means you get to hold on to your shares, you do have to pay back the money regularly, which might not be a burden you want your business to take on. Ultimately, which mode of financing is right for you depends on how keen you are to hold on to your company shares, weighed against whether you want the added bonus to your business that equity financing can bring.<\/p>\n

Debt and Equity for Investors<\/strong><\/h3>\n

From the perspective of investors<\/a> and investment funds, equity and debt both have their advantages and disadvantages.<\/p>\n

Equity has the potential for a bigger payoff than debt financing \u2013 but since it could be some time before an exit or dividends start being paid, it isn\u2019t as predictable a return as debt financing. Equity financing can appeal to angel investors who want to be especially involved in the business \u2013 having a direct stake in the business\u2019s success gives an extra drive to get involved.<\/p>\n

On the other hand, debt financing is more secure and promises consistent, regular returns. Investors and investment funds have the option to use both debt and equity financing in different investments, so the sensible strategy is probably to diversify \u2013 it means you get the potentially big rewards of equity investment, tempered by the security of debt instruments.<\/p>\n

Here at Crowd for Angels we connect investors and entrepreneurs looking for both equity and debt financing. Which is best for you depends on your individual circumstances. If you\u2019re an investor you have the chance to connect with a range of exciting businesses, with the potential for lucrative returns. And if you\u2019re an entrepreneur, either option puts you in touch with experienced angel investors with the contacts and knowledge to help your business to succeed. So whichever option is best for you, there\u2019s great potential for a fruitful investment.<\/p>\n","protected":false},"excerpt":{"rendered":"

If you\u2019re an entrepreneur looking to get financing for your business, the decision between equity and debt can be tricky. You might have done a lot of work on preparing your business to start getting financed \u2013 no doubt you\u2019ll have a detailed business plan, a sensible valuation, and a good awareness of your target […]<\/p>\n","protected":false},"author":3,"featured_media":319,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[98],"tags":[22,79,364,366,365],"yoast_head":"\nWhat is Equity Financing, and is it Better than Debt?<\/title>\n<meta name=\"description\" content=\"If you're an entrepreneur seeking financing or an investor looking for a good return, you'll need to know whether debt or equity financing is best for you.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/crowdforangels.com\/blog\/equity-financing-better-debt\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" 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\/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Richard Gill\" \/>\n\t<meta name=\"twitter:label2\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Organization\",\"@id\":\"https:\/\/crowdforangels.com\/blog\/#organization\",\"name\":\"Crowd for Angels\",\"url\":\"https:\/\/crowdforangels.com\/blog\/\",\"sameAs\":[],\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-GB\",\"@id\":\"https:\/\/crowdforangels.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/crowdforangels.com\/blog\/wp-content\/uploads\/2019\/06\/logo_cfa-square-.png\",\"contentUrl\":\"https:\/\/crowdforangels.com\/blog\/wp-content\/uploads\/2019\/06\/logo_cfa-square-.png\",\"width\":600,\"height\":600,\"caption\":\"Crowd 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