ENTREPRENEURIAL FINANCE
DEBT FINANCING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Lenders have no access to business equity
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Can’t be forced into bankruptcy
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Don’t have to pay it back
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No interest or monthly payments
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Detailed explanation-1: -Advantages. Less burden. With equity financing, there is no loan to repay. The business doesn’t have to make a monthly loan payment which can be particularly important if the business doesn’t initially generate a profit. This in turn, gives you the freedom to channel more money into your growing business.
Detailed explanation-2: -One advantage of debt financing is that it allows a business to leverage a small amount of money into a much larger sum, enabling more rapid growth than might otherwise be possible. Another advantage is that the payments on the debt are generally tax-deductible.
Detailed explanation-3: -Tax – Debt financing comes with tax benefits, helping you reduce your tax bill. Since debt financing is a business loan and not a private, personal loan, you can claim a tax deduction on fees, charges, and interest. Profit sharing – With debt financing, your key obligation is to make the agreed payments on time.