Getting a small business off the ground and keeping it running requires a great idea, expertise, and a funding source. In some cases, you might fund the venture yourself; but, many entrepreneurs have to take on debt or sell equity to access the capital they need. A business consultant will help you understand the difference and decide which approach is better suited to your circumstances. Below is a brief guide to the difference between debt and equity capital.

What Is Debt Capital?

Personal loans, business financing, and credit card advances are all considered sources of debt capital. Financing your business venture with debt has several advantages, such as ease of access and retaining control over your new company. However, your lender might require you to start making payments right away, which can create more financial pressure than the startup can bear. If the business doesn’t make it, you might also lose any personal property you used as collateral and could be held personally responsible for the balance of the loans.

Understanding Equity Capital

Unlike a loan, generating equity capital doesn’t involve taking on debt. Instead, you acquire it by trading an ownership stake in your company in exchange for funding. An upside of equity capital is that you don’t have to start paying out until you’ve reached a certain level of success, and the investor only takes a percentage of the profits. However, you might have to surrender control of the company, and you’ll be legally required to act in the best interests of those shareholders. Equity capital arrangements can be very complex, so always speak to a business consultant before looking for investors.

If you’re launching a new venture in the Greater Atlanta, GA, area, rely on the business consultants at JJR & Associates LLC to maximize your chances of success. Their staff provides unmatched support to all their clients, making themselves available 24/7 to answer questions and handle any situation. For an overview of their services, visit the website, get more advice on Twitter, or call (404) 437-7748 to meet with a business consultant today.