What Is the Difference Between Debt and Equity?

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Debt is loan financing used to start or grow a business. Equity financing is investment money received in exchange for shares of ownership in the business. The National Federation of Independent Business indicates that debt has to be repaid, while equity does not have to be repaid.

NFIB indicates that primary advantages of debt include the ability to spread the cost of an asset over time and retention of ownership and control in the business. Primary advantages of equity investment include sharing of risks in the operation, a cash infusion to operate the business and addition of new owners who bring their own expertise.