There are two main ways companies raise capital: debt and equity. Debt financing means borrowing money and promising to repay it on a fixed schedule at a fixed interest rate. Your creditors are entitled to exactly what you owe them, and if they don’t get it, they can sue you for the money, and if you don’t have the money, they can force you into bankruptcy.
Equity financing means selling shares to investors without having to pay them back.Your shareholders have no rights everything Clear; there is no specific amount that must be returned or a schedule of when it will be returned.but they They are co-owners of the company in a way, have a residual debt on its cash flow, and vaguely hope to one day get their money back through dividends, share buybacks, or mergers.they can’t make You distribute the profits in a direct way, but what they want is a share of the profits. There are no guarantees as to what they will get, limit If they buy 1% of the stock when the company is worth $10 million, they invest $100,000. If a company is worth $100 billion and you sell it, you get back $1 billion. It’s hard when you have debt.
