Starting and expanding a new business can be an exciting venture fuelled by fresh ideas. However, obtaining funding for an SME can generate debt or leave you with reduced ownership. For example, equity financing is a common method that attracts many business owners as they generally do not need to repay the funding. However, issuing shares can significantly impact your business journey in the long term. This ownership dilution can affect your income and the level of control you have over your business. This article explores funding methods for small businesses or startups that can allow you to retain full ownership of your company. <\/p>\n\n\n\n
Many new business<\/a> journeys are funded either by equity financing or debt financing<\/a>. The following table defines each option.<\/p>\n\n\n\nType of Capital-Raising<\/strong><\/td> Explanation <\/strong><\/td><\/tr> Equity Financing<\/td> Giving equity means giving shares in your company. Shareholders will typically receive a percentage of profits, voting rights and the right to share in sale proceeds if you sell your company. An investor being issued with a material stake in your company may also request a seat on the board.
Equity financing can come in many forms, including:
+ venture capital investment;
+ angel investment; and
+ equity crowdfunding.\u00a0
Equity financing carries the advantage of not requiring repayment. However, issuing shares also means a reduction in your level of ownership. This can impact your earnings and your influence over the business.\u00a0<\/td><\/tr>Debt Financing<\/td> Debt financing<\/a> involves borrowing money to raise capital. With most forms of debt financing, business owners must repay the full loan amount plus interest. This form of funding would allow you to retain ownership. Disadvantages include that it can be difficult for some to obtain loans, and repayment reduces profitability. <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n