Financing with debt requires borrowing, whereas financing with equity requires issuing shares of stock.
Debt financing is the process by which a business raises funds by offering investors debt instruments. Equity finance, which involves issuing stock to raise money, is the reverse of debt financing. When a company sells fixed income securities like bonds, bills, or notes, debt financing takes place.
The practice of obtaining money through the selling of shares is known as equity financing. The reason companies raise money is because they can have an immediate need to pay bills or a long-term initiative that would help them expand that needs funding. A company that sells shares effectively transfers control of the business in exchange for money.
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