Debt Vs. Equity
You can secure financing for your business in two different ways: debt and equity.
Debt is a form of a loan that provides you with limited funding for your business. This debt has to be repaid within a set period. You can choose either an unsecured loan or a secured loan.
Unsecured loans are generally harder to obtain since they are risky for lenders. The risk results from the lack of collateral in the transaction and they have to trust that you’ll repay the loan in time. Secured loans are secured by your assets, which will be taken away if you’re not able to repay the loan on time.
However, the best thing about loans is that there are a lot of lenders, like CreditNinja.com, in the market. This means you have lots of legit options for different loan products.
Equity works by selling a percentage of your business for funding. In this case, you won’t be paying back anything since the investment will pay back the investor with all the benefits and profits your business will have in the future.
Keep in mind that both of these options are reliable, and there is no better one. Also, all of your financing will consist of either debt or equity, or a combination of both. Here are some financing options for you to jumpstart your businesses.
Of course, if you have saved up some money for your business, it’s always advisable to use it instead of taking out a loan or selling an equity stake. This is arguably the wisest and most conservative way of funding your business since you won’t be taking any risks in doing so. However, the problem with this option is that the financing is limited by the amount of money you’ve managed to save.
Some entrepreneurs even take this a step further by taking out equity from their homes. This is an effective solution, but we don’t recommend it because of the risk of losing your house. Some even take out money from their retirement savings and insurance policies to access capital. Of course, these options are also risky.
You can obtain capital for your business by taking out money from your savings. However, we don’t recommend using your retirement savings, home equity, or insurance. These options involve a lot of risk and could put you or your family in jeopardy if the business fails.