Full Guide: How To Capitalize Your Business



Debt is a loan issued to the company. The document that evidences the debt is a promissory note, which explains the terms of the loan, such as when the loan will be repaid and at what rate the interest must be paid. As opposed to equity, lenders receive no ownership interest in the business. But there are exceptions, such as convertible notes, which are essentially debt that can later be converted to equity. These are common in more complicated financings, such as angel investor and venture capital financing. 

For the rest of this article we will be showcasing the advantages and disadvantages as to equity and debt financings, respectively, from the perspective of the business owner.