What is the difference between debt and equity funding?

Debt and Equity Funding are considered two different categories of financing resources for business owners who demand capital to expand.

Debt Funding involves borrowing money from a legal institution, such as a bank, as long as agreeing to pay some interest, which is basically the price of money.

Debt has the advantages of not compromising future profits of the company and its interest can be deducte from the company's tax return. However, it comes with activity restrictions and the risk of insolvency that interest rates bring,

Equity Funding involves attracting investment to a company by selling stocks. It balances the company's debt-equity ratio, which demonstrates to future investors that the company is not a risky one to invest in, but also brings lots of bureaucracy related to meetings with investors and monthly mailings. Besides, if the company's growth is attained, the profits must also be shared with the stockholders, or shareholders.

It’s possible to raise more money than a loan can usually provide

Explanation:

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