By Adam Pescod on Small Business UK – Advice and Ideas for UK Small Businesses and SMEs
Debt finance is one of the most popular funding options available to small firms in the UK. Unlike equity finance, which entails giving away a share of your business in return for investment, debt finance involves borrowing money to either start or grow a company.
Not too long ago, the most common forms of debt finance were bank loans, along with loans from friends and family. However, they have been joined by a raft of new debt finance options, the majority of which emerged in the wake of the recession. From challenger banks and online lenders to peer-to-peer (P2P) and invoice finance, these new players have delivered greater choice to businesses and helped bring the debt finance industry into the 21st century.
The benefits of debt finance
One of the main advantages of debt finance is that it allows a business owner to stay in control of their company. While equity finance tends to offer higher amounts of capital, a founder will have to sacrifice a portion of their ownership – or equity – in exchange for the funding. With debt finance, the only cost to a