If you were establishing your own business, under what circumstances would you choose one instead of the other?

Explain the role of each in a 700 to 1 050 word paper.

In certain situations, I’d choose debt funding over equity financing if I was starting my own company. In some cases, debt financing may be a better option than equity financing, such as when a business needs capital immediately and has outlined a strategy for using it effectively and efficiently. If the company has a predictable cash flow, which can support loan repayments, debt financing may be an attractive option. Debt financing can also offer some tax advantages, as the interest paid on loans is usually deducted when filing income taxes. Dividends to shareholders however are not.

In some cases, equity funding may prove to be more advantageous than debt. In some cases, issuing stocks in exchange of investments could provide the benefits you need without having to worry that loans will be repaid. Consider your own personal preference when making a decision. An individual, for instance, may not want to take on hefty amounts of debt and prefer instead to sell stock. The decision to choose debt over equity will ultimately depend on the individual’s situation, but both have their own risks and rewards.