- About us
- How to start business
- What are key performance indicators of Business?
- Key things to consider for expansion Globally?
- Key problems in Manufacturing Industry
- Problems of Startups
- What is Business Plan?
- Case Study
- Pricing Details
Taking Debt funding is it good for startups
The two options startups have for raising funds is equity being the easier route and debt being the second option. Equity is where in your give shares of your company to the investor at the valuation agreed and percentage of equity is shared.
The equity dilution ensures that value of the equity goes up, this is when you have got venture capitalist as your investor or you have high net worth individual who is giving you funds.
The question of debt funding raises when your startup has finished post proof of concept and having traction but not at the speed on which you can build your valuation and present to investors.
Debt funding is the other options, which startups have when they do not get VC funding. There is not much difference in debt funding and you taking loan from pawnbroker. You may keep some as collaterals for raising debt, which comes at percentage of interest, which will also become mounting in case not paid.
Don’t go into debt unless it’s to make a long-term investment that will pay off in the future for example in case you are making a product, which will drive revenues or any asset which can yield you better results over a period of time
For startups raising debt is a big no as there is no asset built over period.