Debt Financing Advantages -Retain ownership and control of the company -Debt obligations are limited to the loan repayment period, after which the lender has no further claim on the business -it generally lacks the complex reporting requirements that accompany some forms of equity financing -Tax Advantages: Debt financing also offers tax advantages to business as interest is deductible for income tax purposes Disadvantages -Need collateral -Can be expensive due to high interest -more risky -Penalties for late for missed payments Equity Financing Advantages -less risky -Do not need to pay interest -Better cash flow -Business can last longer because no liability Disadvantages -Lose ownership -Less control on the business -Have to share the profit with the shareholders
Debt FinancingAdvantages-Retain ownership and control of the
company-Debt obligations are limited to the loan repayment period,
after which the lender has no further claim on the business-it
generally lacks the complex reporting requirements that accompany
some forms of equity financing-Tax Advantages: Debt financing also
offers tax advantages to business as interest is deductible for
income tax purposesDisadvantages-Need collateral-Can be expensive
due to high interest-more risky-Penalties for late for missed
paymentsEquity FinancingAdvantages-less risky-Do not need to pay
interest-Better cash flow-Business can last longer because no
liabilityDisadvantages-Lose ownership-Less control on the
business-Have to share the profit with the shareholders-need to
follow strict rules and regulations.
