Get The Basics

What Types Of Funding Are There?

The difference between Debt, Equity, and Grants
Small Businesses
The Basics

Debt, Equity, and Grants are the three core categories of funding that you will come across. Each has a large number of sub categories, but this is more or less how they break down: 

  • Debt:  Represents a loan from a saver to a borrower. You borrow a set amount of money (the principal), you don't have to pay it back until a specific date (maturity), and then you pay it back with some amount of interest (interest rate).
  • Equity: Represents a percentage ownership in some company. In exchange for a certain amount of money, the investor receives a certain percentage ownership of your venture. The percentage depends on the ratio of how much money was invested to the valuation of your venture.
  • Grants: Represents money that you do not have to pay back. Grants are typically given to organizations with the expectations that the funds will go towards a specific cause. They are most commonly used by nonprofits, but can be accessed by for-profit ventures as well
The Details

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