Pros and Cons of Funding

The Pros and Cons of different types of funding

There are two main types of funding for businesses: 1) Debt Financing; 2) Equity Financing.

Debt Financing

Debt Financing is when you borrow money from a lender and agree to repay it with interest. This type of funding can be easier to obtain than equity financing, but it can be more expensive in the long run.

Pros: Debt Financing is that you do not have to give up any ownership or control of your company.

Cons: You will have to repay the loan with interest, which can be a significant expense.

Equity Financing

Debt Financing is when you borrow money from a lender and agree to repay it with interest. This type of funding can be easier to obtain than equity financing, but it can be more expensive in the long run.

Equity Financing is when you sell a portion of your company to investors in exchange of money. This type of funding can be more difficult to obtain than debt financing, but it can be less expensive in the long run.

Pros: You don’t have to repay the money, and you can keep all profits.

Cons: You will give some ownership and control of your company.

Within this two main categories, there are many different types of funding available. Here are some of the most common.

Grants

Grants are free money that is given to businesses and organisations for specific purposes. Grants can be a great way to get funding for your business, but they can be competitive to apply for.

Pros

• Free Money
• Can be used for a variety of purposes, such as research and development, product development, and marketing.

Cons

• Can be competitive to apply for
• May have specific requirement that your business must meet.

Crowdfunding

Crowdfunding is a way to raise money from large number of people, usually through online platform. Crowdfunding can be a great way to raise money for your business, but it is important to have a strong campaign and to be a realistic about how much money you can raise.

Pros

• Can be good way to raise money from a large number of people.
• Can help to build brand awareness and excitement for your business.

Cons

• Can be time-consuming and expensive to run a crowdfunding.
• You may not reach your fundraising goal.

Angel Investors

Angel investors are individuals who invest their own money in early-stage businesses. Angel investors often

have industry experience and can provide valuable mentorship in addition to funding.

Pros

• No Debt
• Expertise and Mentorship
• Access to networks

Cons

• Loss of Control
• High developments
• Difficult to find

Bootstrapping

Bootstrapping is when you fund your business with your own money and savings.

Pros

• You maintain full ownership and control of your business
• You don’t have to repay any money.

Cons

• Can be difficult to grow your business without external funding.
• May miss out an opportunities due to limited resources.

About Author

Vikas Singh (B.Sc, MBA, LLM)

Co-founder of Aiws Accountech

Vikas, driven to empower others with his knowledge , disseminates insights and expertise gained from his journey at Aiws Accountech.