Sources of Funding

There are two general ways to fund your enterprise.

  • Debt
  • Equity

WHAT IS DEBT FINANCE?

Debt financing means borrowing money without giving up ownership. You will have to make monthly payments to pay back the interest and capital on the loan made. However, the interest on the loan is a deductible expense when calculating profit. You need to bear in mind that it is likely to affect your credit rating if you take on too much debt

Methods of debt finance:

  • Bank Loan
  • Friends and family
  • Peer-to-Peer Lending
  • Government Start Up Loans

WHAT IS EQUITY FINANCE?

Equity financing often means giving shares in your company to an investor. This means that the shareholding you have within your business becomes diluted.

Methods of equity finance:

  • Friends and family
  • Venture Capitalists
  • Angel Investors
  • Crowdfunding

You should bear in mind that the newer your business, the larger the stake that you are likely to have to give away in the business.

When negotiating the terms and conditions of your investment in detail, if you decide to go down that route, then it sometimes pays to get legal advice first. The Entrepreneur Team atNabarro offer various fixed fee products.

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