In the second workshop of the Startup Workshop, we focussed intensively on the types of financing. For many founders, the question of the right financing is one of the most important decisions. Here are the advantages and disadvantages of equity and debt capital.
Equity - full control, full risk
If you finance your company with equity, the money comes either from yourself or from external investors. The big advantage: you don't have to pay anyone back and you keep all the profits. However, you also bear the full risk - if the company fails, you lose the money you invested.
Borrowed capital - loans with obligations
Borrowed capital, such as bank loans, offers you another option. You borrow money and pay it back with interest. The good thing about this is that you don't give up any shares and retain full control. The disadvantage: the repayment obligation remains, no matter how well or badly your company performs.
Which option is right for you?
The decision depends on many factors - above all your risk profile and the availability of investors. In any case, you should carefully consider which form of financing is better suited to your business model.
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