💲 Debt Vs. Equity 💲
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Should I be raising debt or should I be raising equity?
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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.
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The sad truth is –
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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.
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Equity - to help build the market.
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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.
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