How to use debt and equity funding to grow your business
You should not need funding if you are growing organically
You can get funding by way of debt, or by giving away a piece of your business
- Equity funding is akin to a marriage – get counselling before you tie the knot
Small businesses need capital to grow.
They can obtain it by way of debt financing or equity financing.
Debt financing refers to a loan from a bank or family, all of which must be paid back, almost always with interest.
With equity financing you offer investors a share of your company – you need not pay back the investment, but investors share in your profits (and losses).
The Money Show’s Bruce Whitfield asked Aurik Business Accelerator founder Pavlo Phitidis how to use debt and equity funding to grow your business (scroll up to listen).
You have organic growth and next-level growth… Organic growth shouldn’t require outside funding…Pavlo Phitidis, founder - Aurik Business Accelerator
Banks have well-defined criteria against which they can offer debt…Pavlo Phitidis, founder - Aurik Business Accelerator
… If you want to accelerate the growth of your business… You’re going to give away 20% or 25% of the shareholding… Find the money from an organisation… that understands your business…Pavlo Phitidis, founder - Aurik Business Accelerator
When you get an equity funder on board, that’s a marriage! Get some counselling ahead of this…Pavlo Phitidis, founder - Aurik Business Accelerator
This is the sort of marriage where you’ve got to make sure you don’t get screwed!Bruce Whitfield, presenter - The Money Show
This article first appeared on CapeTalk : How to use debt and equity funding to grow your business