Debt and equity financing is the sources of funding can provide you with all the cash you need to start or grow your business.
Debt financing
Debt financing means borrowing money from an outside source with the promise of paying back the borrowed amount, plus the agreed-upon interest, at a later date. When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors can be considered as debt financing.
For one thing, debt financing can be used to fund just about any kind (or size) of business. The biggest disadvantage of using debt to finance growth is that debt requires repayment. Debt has to be repaid every month, regardless of how well a business is doing. That means that if your sales take a dip, you may find yourself unable to make your monthly loan payment.
Apollo Food Holdings Bhd’s long-term debt that ended in April 2014 was RM0.0 Mil. Apollo Food Holdings Berhad is not using debt-financing but they are focusing on equity-financing.
The advantages of the company not using debt financing is that some new businesses sometimes find it difficult to make regular loan payments when they have irregular cash flow. In this way, debt financing can leave businesses vulnerable to economic downturns or interest rate hikes. Apollo Food Holdings Bhd didn’t choose to use debt financing because carrying too much debt will making unattractive to investors and this will reducing their ability to raise additional capital in the future. This is one of the disadvantage of using debt-financing.
Need to write example of debt or not?
Equity financing
Equity financing, means raising capital by selling shares of a business to investors. Unlike debt financing, the capital raised through equity financing isn't paid back in monthly instalments with interest. Instead, investors put money into a business and become partial owners of that business. An equity instrument is any