Business Loans vs. Equity Financing
By Pierre Mouchette | Real Property Experts
Business financing comes in the form of debt or equity. The difference between the two is:
Business Loan - is debt acquired after receiving funds from a lender who expects to be repaid with interest at some specified rate over a specific period. Although each lending situation is unique, many banks utilize some variation of evaluating the five Cs of credit when making credit decisions:
Note: Mezzanine Financing is a hybrid of debt and equity financing. Mezzanine Financing is typically used to finance the expansion of existing companies. Debt capital gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.