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Moving beyond equity! How startups shift to debt financing fuel business growth?

Livemint · 5m

Startups are increasingly turning to debt financing as an alternative to equity fundraising in order to secure the necessary funding for growth. Debt financing allows founders to retain control and minimize tax outgo, while also offering fixed interest rates and flexible repayment schedules. However, debt funds come with risks such as financial strain and impact on creditworthiness if repayments are not made in a timely manner. Startups should carefully assess their risk tolerance and cashflow projections to strike a balance between debt and equity financing. Various types of debt financing options, including bank loans, term loans, collateral loans, and vendor financing, are available for startups. Debt financing has become a reliable source of funding for startups during times of limited equity investments.