Asset-based LendingBlog

Debt & Dating: A Love Story

By 03.01.22April 13th, 2022No Comments

I know it doesn’t sound like the most romantic topic but hear me out…I’ve always thought that debt is like dating, and equity is like marriage. And this first date can definitely lead to happily ever after.

Many companies find themselves captivated with venture capital — it is a darling in the finance world, and it certainly has its place. Venture capital often comes with name cachet and validation, and the enticing element of having someone give you money upfront that you may not need to pay back.

Debt, on the other hand, doesn’t seem as sexy. You know you have to pay it back, and it sounds expensive.

The difference is with debt — like dating — is that it’s not tricky to untangle. When it’s time to walk away, you can do just that.

Equity, however, is like a marriage. You’re in it for the long haul – and when it comes to divorce, it can be complicated, challenging, and above all, costly.

Let’s say a venture capitalist invests in your company in return for 10% equity. Exciting, right? Someone is validating your idea and giving you the money you need to grow. Let’s say you become super successful, and you find a company that wants to acquire you. Also exciting, right? But when you sell for $20 million, you just gave away $2 million of that payday to your investor.

On the other hand, if you were to finance your growth via a line of credit and pay it back, when you sell you own most — if not all — of your company. I say most because venture capital and debt can work hand-in-hand, so if you are using a combination of the two, you have likely given away a smaller piece of your pie. In that $20 million payday example, maybe you pay a couple hundred thousand on your line of credit versus $2 million.

That means a bigger payday for you. And that, I think, is a fairy-tale ending.

About eCapital

eCapital’s team of industry experts work to thoroughly understand your business before recommending tailored funding solutions to meet your capital requirements. Whether it’s a rapid asset-based line of credit or a strategic long-term financing plan, our skilled, dedicated, and friendly team structures specialized alternative funding that is as unique and distinct as your business.

For more information about how our experienced team supports businesses’ capital requirements through all stages of development, visit eCapital.com

eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment financing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.


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