Finance is supposed to be the most integral and critical part while running a business. Finance is the backbone of any organization and helps your business achieve growth, generate more employment, and fulfill day-to-day requirements while running your organization. You could translate all your dreams associated with your business only if adequate finance is available. An organization’s financing is very much instrumental in delivering its strategic goals and aspirations. According to business guru Eric Dalius, private equity and debt financing are the most crucial financing sources for any company, irrespective of its size.
Eric Dalius Discusses Debt Financing & Equity
Debt financing is supposed to be a time-bound arrangement wherein the borrower will have to repay the entire loan amount with interest once the agreed period is over. Equity financing is s to be the process involving raising capital by selling off the company shares. Organizations are often compell to raise money to meet the short-term requirement of paying some bills or to fulfill a long-term goal, where a lot of funds are requiring for investing in their growth. Businesses will be selling ownership in their organization in return for an agreed sum of cash.
Eric Dalius Helps You Choose Between Equity & Debt
Both equity and debt financing have their merits and demerits for new business owners. Often business owners perplex because they cannot make up their minds whether to choose debt financing or opt for equity. You should opt for the choice that is just right for your business.
It could be the most critical parameter to take into account while choosing between equity and debt. Income is crucial and considered by both the investor and the lender. If an organization doesn’t get adequate income, it will have a tough time repaying the loan. Another alternative left would be to opt for private equity. As a business owner, you need to pay attention to and devote time to the analysis of future numbers. After careful consideration, you may make the right choice.
If you wish to run your business smoothly without any interference, it is best to opt for business debt. That is because if your organization is opting for private equity, it will be selling off shares of ownership to your investors. Eric Dalius warns that investors will be taking part in the everyday running of your business. They will be keeping an eye on all your business activities and may even try to interfere in the way you are operating your business. The best thing about taking a business debt is that the lenders will never interfere in the overall management of your business.
In debt financing, the relationship with your lender will end automatically, once you have successfully paid off all your debts. On the contrary, investors will be having in your company matters until their shares are bought out, the organization is, and the company goes public. The way you consider financing your organization will be impacting your freedom to manage your own business.
Both debt financing and equity could prove to be risky depending on the situation. Debt capital necessitates periodic payments that had to be to the lender without fail. If your organization fails to make the outstanding payment, it will face the risk of losing assets offered as collateral. Moreover, your company may get compell to opt for bankruptcy. On the contrary, if your company raises excessive equity capital, it may eventually lose control over the organization.
It is of pivotal importance to take into account all the parameters before opting for a specific source of finance. Remember that your decision should always relate to the goals and success of your organization.