What is the difference between debt and equity financing?

28th Oct 2009 by Gary

The difference between debt and equity financing is with equity financing, you normally issue stock in the company - whether publicly or privately - in order to raise needed cash. Debt financing is of course using debt to raise cash, where issuing bonds is one way to do that. With debt financing you must offer an interest rate to entice people or institutions to invest in your company. The more risky the venture the higher interest rate you must offer.

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