Cash is QUEEN

As a business owner, you're likely wondering: How can I secure the capital necessary to scale my business? With 30+ years of experience across Wall Street, tech, investing, and social impact, I’m here to share my insider knowledge with you.?

Are you considering which type of capital is best to grow your company? You have options: debt financing, equity financing, or a combination of the two. First, you need to make some decisions about the end goal for your business, then you can consider the advantages and drawbacks of each option to determine which best aligns with your business goals.

Business loans are a good example of debt financing, which means you borrow money that you agree to repay over time with interest. One of the pros of debt financing is that you’re able to maintain full ownership of your business while accessing the necessary cash, and all of the interest on a business loan is tax-deductible. It's a common choice for entrepreneurs who prefer to retain autonomy and are confident in their ability to repay borrowed funds.?

Debt can also help demonstrate financial health and responsibility. Repaying your debt on time gives you a good financial history. Think of it like having a credit card—showing the company that you can make timely payments builds your credit score, which shows lenders that you are reliable. This way, when you need credit for a big purchase, your solid credit history increases your chances of receiving a loan.

For many business owners, especially those in the early stages of building their company, securing a bank loan or other forms of debt financing is a good option. Whether it's financing equipment, covering operational expenses, or bridging cash flow gaps, debt financing provides the necessary infusion of capital without diluting ownership. However, it will require having a few years of financial statements in order to secure a loan from the bank. You’ll need to demonstrate that the company is able to pay it back.

Alternatively, equity financing does not cost the company any additional money, because it is an investment, rather than a loan that you must repay. With equity financing, you sell off a portion of your business to investors in exchange for cash. Equity financing works for businesses with high growth potential. The key here is that to be venture-backable, your company must be able to generate major returns for investors. Think of it this way… if I invest $1, can you turn that into $100? Can your company quickly dominate the market? Can it scale to 100x in sales, customers, etc?? I hope you say yes, and come tell the Wocstar team about it.

One benefit of bringing on investors is that you gain access to expertise, networks, and resources that can help accelerate your company's growth trajectory.

However, equity financing comes with drawbacks, because investors will have partial control over your company and your profits. But hey, 100% of zero is still zero, so just make sure the math is mathing. Additionally, finding the right investors who align with your vision and values can be time-consuming. And since your investors will be involved for a long time, you want to be sure you are choosing the right investors for you. Remember, you have choices. If you’ve got a great, high-potential company, there are various sources of funding out there (crowdfunding, angel investors, venture capital, etc.), but the key is choosing what’s best for you and your business’ unique needs. The key is to align your financing strategy with your long-term vision for your business. You are working hard to build your company, so do it with people who share your values and contribute to your mission. Life is too short and business is too hard to deal with a**holes.?

If you're looking to learn more about how to raise capital, consider enrolling in our online Academy. Through our comprehensive curriculum, you'll learn not only how to navigate different financing options and get in front of investors, but also how to craft a compelling narrative that resonates with both investors and customers. From understanding what investors ask to deciphering what they're truly listening for, our course covers every aspect of the fundraising journey.

Don't miss the opportunity to gain more practical, invaluable insights. Apply now to join the Wocstar Ghetto Film School Entrepreneur Academy and unlock the capital your business needs. Application and more information are available at www.wocstar.com.?

Citation:?

Maverick, J. B. “Equity Financing vs. Debt Financing: What's the Difference?” Investopedia, 1?Nov. 2023, www.investopedia.com/ask/answers/042215/what-are-benefits-company-using-equity-financing-vs-debt-financing.asp.?