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Debt or Equity, Part 1

When you get serious about raising capital for your business (and anytime you need cash, it's serious), consider two major avenues:

Debt financing means borrowing money for a fee. Debt financing is ideal, for example, when you don't want to dilute ownership of your business in exchange for the cash you need. Of course, on the downside, you have to repay the full amount of the debt plus interest at some point in the future. If the debt exceeds your ability to pay it back on schedule, you may be forced to liquidate assets or go into bankruptcy.

Equity financing means selling a piece of your business in exchange for a cash investment. Equity financing is great if you don't want an obligation to repay a lender, but, on the downside, you have to give up a portion of your ownership in the business. Give up too much ownership, and you may lose control of your business.

So which approach is better for your company? The answer to that question varies depending on the goals that you have for your business, the ability of your firm to repay its debt, the amount of money needed, and many other factors. Each approach has its

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