5 Reasons to Choose Debt Financing Over Equity Financing for Your Business

LearnAugust 27, 20243 min read
Caroline Lu, Product Marketing Manager

As a business owner, deciding how to finance your growth is a critical decision. While equity financing involves selling a portion of your company in exchange for capital, debt financing allows you to borrow funds while maintaining ownership. Here are five compelling reasons to choose debt over equity financing for your CPG brand.

1. Retain Full Ownership

When you opt for equity financing, you give away a piece of your business, along with a portion of future profits. With debt financing, you maintain full control and ownership of your company. This means you can make decisions independently, stay true to your vision, and reap the benefits of your hard work. Settle’s working capital solutions provide the necessary funds without requiring you to relinquish any equity.

2. Predictable Repayment Terms

Debt financing offers clear, predictable repayment terms. Unlike equity financing, where you owe a percentage of future earnings, debt financing requires fixed payments over a set period. This predictability allows you to budget more effectively and manage your cash flow with confidence. Settle’s flexible repayment options are designed to fit your business needs, ensuring you can repay terms without hidden fees or penalties.

3. Tax Advantages

Interest payments on debt are typically tax-deductible, which can significantly reduce your taxable income and overall tax liability. This makes debt financing a cost-effective option compared to equity financing, where dividends paid to shareholders are not deductible. By leveraging Settle’s non-dilutive capital, you can benefit from these tax advantages while investing in your business growth.

4. Boost Creditworthiness

Successfully managing and repaying debt can enhance your business’s credit profile, making it easier to obtain future financing. A strong credit history demonstrates to lenders that you are a reliable borrower, which can lead to better terms and interest rates in the future. Settle’s solutions not only provide immediate funding but also help you build a solid financial reputation, positioning you for long-term success.

5. Focus on Growth

With debt financing, you can focus on growing your business without the pressure of meeting shareholder expectations. Equity investors often seek immediate returns and influence business decisions, which can distract from your core objectives. Debt financing allows you to use the capital specifically for growth initiatives such as expanding inventory, enhancing marketing efforts, or scaling operations. Settle’s seamless integration with your financial workflows ensures that you can concentrate on what matters most - scaling your brand.

Get Founder-Friendly Financing with Settle

Choosing the right financing strategy is crucial for your business’s success. Debt financing offers numerous benefits, including retaining full ownership, predictable repayment terms, tax advantages, improved creditworthiness, and the ability to focus on growth. Settle Working Capital empowers you to scale your consumer goods brand with transparent, non-dilutive financing, ensuring you have the resources you need without sacrificing equity.

Visit us today for more information on how Settle can help you achieve your growth goals or see your potential credit eligibility (subject to approval) with our working capital calculator.

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