Types of Loans

A line of credit is somewhat like a personal credit card: The lender disburses funds as they are requested, up to a preset limit. The borrower pays interest (and usually a portion of the outstanding balance) on the amount of funds outstanding at the end of each borrowing period, usually monthly.

Equity versus Debt

Equity financing is an investment in the ownership of the company. Equity can come from your own resources, from family, friends, employees, and customers, or from outside investors, including venture capitalists who seek to buy into businesses that have the potential for growth. Equity investors are generally given a portion of ownership (and control) of the company; looking at it from the point of view of the founder, accepting equity financing from others reduces the percentage of the company that you own and control.