Chapter 3

Debt versus equity finance

Most forms of funding fall into one of two camps. Let’s look at the main pros and cons of debt versus equity.

A person in construction holds a clipboard and bag of money.

The difference between debt and equity funding

Debt is a loan that you have to pay back. Equity finance is what you get when you sell a stake in your business to someone else. They are very different things.

This doesn’t have to be an either/or choice. A combination of both debt and equity funding might be best for your business at times. But it pays to know what you’re getting into with each.

Debt vs equity pros and cons

Pros and cons of debt vs equity financing

Debt vs equity pros and cons

Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

How to finance your business

Need finance for your business? Learn about the types of finance, approaching lenders and investors and more.

Download our guide to financing your business

Your intro to the different types of finance, including their pros and cons. Fill out the form to receive our finance guide as a PDF.

Start using Xero for free

Access all Xero features for 30 days, then decide which plan best suits your business.

  • Included
    Safe and secure
  • Included
    Cancel any time
  • Included
    24/7 online support