When entrepreneurs on the show Dragons’ Den succeed in getting funding from the Dragons, in exchange they must give away a percentage ownership of their business. This also means a degree of control.

For many owners, this seems a fair deal. But its not for everyone.

The alternative way to raise money is debt funding.

However, the word ‘debt’ can be scarier than the prospect of presenting to Dragons on national TV.

In truth, unlike equity or seed funding, debt funding can be a powerful ally for growth that retains your control and ownership of the business you started.

Other advantages include:

• Predictable value: The cost of repayments will be the same across the length of the loan. In comparison, the value of the equity you have given away may multiply as your business grows, meaning you have lost out on more value.
• Cost: Depending on the equity offers you receive, the cost of a loan could work out cheaper.
• Tax benefits: Typically, you can write the interest payments of the loan against your profit and loss accounts (speak to accountant or tax advisor on this).
• Flexibility: Normally, debt financing gives you funds to spend on whatever you think is necessary for the company. Equity funding often comes with input from the investor who wants to be treated like a new board member.

At Risecap, we offer our clients advice on what type of financing is best for their particular set of circumstances, and make sure you know the pros and cons of each.

‍