📄ONE-PAGE LESSON 7
Key Points You’ll Learn
🏦 Understand the main sources of business financing: debt, equity, and credit
🔍 Learn the pros and cons of each option
✅ Apply financing wisely as a tool for growth, not a trap
Why This Matters
Every business needs capital at some stage — to launch, expand, or survive tough times. But not all financing is created equal.
Choosing between debt, equity, or short-term credit can determine whether your business grows sustainably or falls into financial stress.
Smart financing is about strategy, timing, and balance.
Core Insights
- Debt Financing (Loans & Bonds) – You borrow money and agree to repay with interest. Debt allows you to keep ownership, but payments are mandatory, which can strain cash flow if sales dip.
- Equity Financing (Investors & Ownership) – You raise capital by selling ownership shares. No repayment obligation, but you give up part of your control and share profits.
- Credit (Short-Term Funding) – Credit cards, credit lines, or trade credit from suppliers give quick access to cash. Useful for smoothing cash gaps, but risky if overused.
- Right Tool, Right Time –
- Use debt for predictable, revenue-generating projects.
- Use equity when you need large capital and strategic partners.
- Use credit to bridge short-term gaps, not as a long-term solution.
- The Golden Rule – Financing should fuel growth, not survival. If you’re borrowing just to cover everyday operations, your business model needs fixing, not more money.
Quick Exercise
1) Write down your current sources of financing (loans, credit lines, owner’s equity).
2) Ask: Are these being used to grow the business or to cover shortfalls?
3) If you had to raise $50,000 tomorrow, which method (debt, equity, credit) would you choose — and why?
4) Identify one financing strategy you could improve (e.g., renegotiating loan terms, reducing reliance on credit cards, or exploring investor partnerships).
Call to Action
Financing can be a powerful lever for growth — but only when used strategically. Understand your options, choose wisely, and keep control of your business’s future.
Face it. Fund it. Grow it.