• Pradyumna Nag

💲 Debt Vs. Equity 💲

💲 Debt Vs. Equity 💲

|

Should I be raising debt or should I be raising equity?

|

Here is a simplified way to answer this for yourself >



Most entrepreneurs have asked me this question as they believe that the only difference is if they will be asked/ able to repay.

|

The sad truth is –

|

If you don’t think you will be able to repay, neither is right for you.


👇🏼 Here’s the right way to think about it >


Ask yourself these questions >


👉 What is the yield of making these investments? Can they be quantified today?

Yes > Consider Debt.

No > Consider Equity.


👉 Is this being spent to create a market or better profit from it?

Create a market > Consider Equity.

Profit from it > Consider Debt.


👉 Is there something more than capital you need – say strategic guidance?

No > Consider Debt.

Yes > Consider Equity.


👉 Can you plan granularly how it will be expended & what the ROI is?

No > Consider Equity.

Yes > Consider Debt.


A good well-structured fund-raise always factors a healthy mix of both.

|

Equity - to help build the market.

|

Debt - to profit from it.



Remember, Equity is & will always be 2x more expensive than debt – just that you don’t pay for it today.



#capital#CFO#finance#strategy#startups#funding#entrepreneurs#venturecapital#debt#privateequity