Of all the ways of raising capital in the company are basically two: a bank loan or investment. Funds are raised to start or grow your business. On what way better and cheaper will be discussed in this article.
To begin, consider the difference between investing and lending …
Upon receipt of the loan money must be returned within a specified time frame, with interest, and, more often than not small. Investments involve the issuance means, followed by obtaining income as part of profit.
The investor (depending on species) may affect the business and even make key decisions. It all depends on his share and contract terms. Lenders also will not be able to affect your business in terms of management. You remain the owner of the business.
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To date, banks issuing loans to businesses abound. But not everyone approves of the application. It is connected with high risks for the banks. An exception is made in the presence of collateral, but not all companies or entrepreneurs cannot afford it. When it comes to small loans, everything is much easier. In the case of an investor it is still difficult. Find them can be difficult and involve, at times, almost impossible. In general, the availability of credit than investment.
In case you are a creditor obligations during repay debt. With investor commitments more. First of all, you need to convince investors in profitability and the profitability of the project. The investor receives a percentage of the profits during the whole period of existence of the company and can gain control over it. So the investor can sell your business to another, and then you will have to deal with another person, and you will not be able to change it.
When lending you have to pay for the obligations, even if the business is not profitable. This may cause additional problems. When investing, you give part of the profits only when it will get. Taking a loan you take the responsibility for his return. When investing, you almost not how it is at risk. Full responsibility takes the depositor.
To summarize, we can conclude: simple answer to this question is impossible. It all depends on your abilities, circumstances and personal preferences. If you take out a loan, you agree to return it in time, while remaining the owner of the business. If you drive a depositor, you agree to share with them part of the profits (and most often from 30 to 50%), and at the same time, the risk is minimal. But to get the money from the depositor is not so simple.
In any case, the final choice is yours. And we hope that these five criteria will help you better understand and choose the most suitable option for you.