Advantages of Borrowing: The main advantage of borrowing money is that, while the lender will charge you interest for using the money, the lender won't have any say in how you run or manage your business.

More importantly, a lender won't be entitled to any of the profits you make; all you have to do is to repay the loan on time. In addition, you can typically deduct the interest payments (but not principal repayments) as a business expense.

Advantages of Equity: First, there's a good practical reason to take investments: Raising money through equity investors allows you to use your cash to pay business startup expenses rather than large loan payments. And unlike a loan, if your business loses money or goes broke, you probably won't have to repay your investors their initial investment.

As long as you've thoroughly disclosed the risks involved in your business, your investors should understand and accept that they are not guaranteed to get their money back.

More Financing with Equity or Debt