|The advantage of debt financing in a new business is that it helps the entrepreneur business keep maximum control over the business, especially in the first days of the business when many factors can affect it. Interest on debt financing is tax deductible so there is little risk placed on the entrepreneur business. However, a disadvantage of this type of financing for an entrepreneur business owner is the fact that high debt may look unattractive to other investors in the project. If you present your plan as clearly as possible with data and realistic forecasts, you might have more success.
Another source of funding for an entrepreneur business owner is equity financing. Equity financing is the same as exchanging money for a piece of ownership in the business. There are different types of investors that can partake in this kind of funding. The advantage of this funding is that it is a long term relationship. The entrepreneur business owner does not have to worry about paying back the investor, but on making the product profitable. With the help of investors, an entrepreneur business can also become more credible in some networks.
The disadvantage of this funding for startup business ideas is that an entrepreneur could lose a lot of control over the business. The investors can contribute their input whenever they want, and they have to be listened to since they are, in essence, owners.