Business Financing FAQ
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What are the main differences between borrowing money and selling ownership interests in my business?
2. What are the main differences between borrowing money and selling ownership interests in my business?
If you take out a loan, you will repay the money over time (usually monthly), with interest. The lender won't receive an ownership interest in your business, and you won't have to share any of your future profits with the lender.
By contrast, if you raise money by selling equity (ownership interests), you won't have to make these monthly payments or repay the investment at any particular date. Instead, if your business is profitable, you'll have to share those profits with your investors, generally in proportion to the percentage of the business they own.
For more information on whether borrowing money or raising it from investors makes more sense, see Loans and Equity Investments Compared.