Equity Financing and Debt Financing
Table of Contents
Differences between Equity and Debt Financing
Sources of Financing
Types of Instruments
Creation of Ownership/Obligation
Types of Long Term Debt Financing - Advantages and Disadvantages
Debentures - Advantages and Disadvantages
Term Loans - Advantages and Disadvantages
Leases- Advantages and Disadvantages
Type of Long-Term Equity Financing
Issue of Share - Advantages and Disadvantages
Retained Earnings- Advantages and Disadvantages
Finance is needed to start and also to ramp up the profitability of the business. There are various sources of finance available when we consider starting a new business. In order to choose the source of finance one must first determine the amount of money needed and also the time when the money is needed.
The financial requirement of the business depends upon the size and type of business in consideration. For example where the nature of business is capital intensive, i.e. the business needs large machineries, equipments and plants then large amount of capital is needed to start such business. Where the business involves trading of products and services then it requires less capital. The two major sources of finance that are available are Equity and Debt. There are also other sources of finance such as Government grants and other incentives that are available. (Hofstrand, 2014)
Equity Financing is a method in which capital is raised by the company through the issue of shares of the company. The investors who invest in the equity shares of the company receive ownership rights in the company. In this type of financing funds are raised by the borrower without...