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When Is Debt Better Than Investment?

An entrepreneur must consider lending as an option to raise funding some situations like the ones given below.
BY Akshay Arora
Feature Writer, BusinessEx
Jan 17,2018

A business needs both debt funding and investment in its business life but the question is when the entrepreneur should seek investment and debt financing. It is a common misconception among entrepreneurs that lending is not good for business as it carries a particular rate of interest on it but the actuality is that its better to take loans in some situations rather than investments.

An entrepreneur seeks for lending when a business needs funding but there no other source is available. There are thousands of startups that seek for investment and if they get it then they act like they are the king of the world but for those who are left out must not give up and must understand that lending is the better way sometimes. An entrepreneur must consider lending to raise capital especially under the given below circumstances:

Early Stage

Funding is most crucial for a business in its early stage as it helps to make plans for reality but not all are able to raise funding from investors. An entrepreneur must understand that raising funds from lenders is better as they are an easysource of financing. The benefit of lending is that a lender agrees to give loans despite a business do not have a proper cash flow or functioning and most businesses at this stage dont have proper running operations. A lender agrees to give loan when an entrepreneur agrees the lenders agreement terms. You can easily find a lender on online networking portals like BusinessEx.

Urgency of funds

Sometimes a business engages in a situation when there is a requirement of capital. So an entrepreneur cant find the investor as it takes time and effort. If one founds the investor then even after that it is possible that investor may back out at the time of closing. But if you go to a lender then you just need to agree to lenders terms and you will get your financing. It is not complex to find an investor or lender anymore as BusinessEx is launched to resolve this issue for your business growth.\

Relationship

When an entrepreneur engages in a relationship with an investor then there is always a fear because an investor can exit from the firm and take its money out of it whenever he/she wants. But if an entrepreneur confirms a deal with a lender then there is surety that he/she cannot withdraw his/her money before the due date.

Complexity

There are a lot of complex issues for the entrepreneur seeking investment. The first one is to find the investor which is now resolved by the business platform, the second one is to convince an investor to make the investment and the third one is clashing of views among entrepreneur and investor. But when it comes to lender there are no complexions as they are easy to find through this platform, even not much of a convincing required to raise funding and there are no clashing of views as lender do not indulge in the day to day operations of the startup.

Interest rate

The major problem that an entrepreneur's face is fear of rate of interest which is actually not that big of a deal because a lender charges a particular rate of interest which is payable after some time so an entrepreneur can be prepared in advance. But in case of investment an investor either get hold of a stake of business or they take much more amount after some time which solely depends on business performance. So it is better to go for debt financing in some situations.

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