Whether you're planning to launch a startup or want to expand your business, you are going to need money. Debt and equity financing are two different financial strategies you can opt for big or small business funding. Incurring debt entails borrowing money for your business, whereas gaining equity means injecting your own or other stakeholders’ cash into your company.

Here I will discuss some pros and cons of equity financing:

Advantages of equity financing:

• Equity contributions do not have to be paid back even if your company goes bankrupt.
• Your business assets do not have to be pledged as collateral to obtain equity investments.
• Businesses with sufficient equity will look better to lenders, investors and the IRS.
• Your business will have more cash available because it will not have to make debt payments.

Disadvantages of equity financing:

• You will have to part with some of the ownership stake, and your business’s profits will be shared by other equity investors.
• You might have to contend with different ideas on how to run the business.
• No tax deduction on dividend payments.

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small business funding