ENTREPRENEURSHIP

Detailed explanation-1: -Because equity financing is a greater risk to the investor than debt financing is to the lender, debt financing is often less costly than equity financing. The main disadvantage of debt financing is that interest must be paid to lenders, which means that the amount paid will exceed the amount borrowed.

Detailed explanation-2: -The biggest disadvantage of relying on debt financing is that banks require a collateral for the loan, which is often the assets of your social business. Or, if you own a start-up whose assets are insufficient for collateral, you may need to provide a personal guarantee.

Detailed explanation-3: -The interest rate is the cost of debt for the borrower and the rate of return for the lender. The money to be repaid is usually more than the borrowed amount since lenders require compensation for the loss of use of the money during the loan period.