While equity financing allows you to get funding for your business without going into debt, the trade-off is that you have to give up a level of control over your business. Debt financing allows you to maintain total control over your business, even if you do incur debt. But taking on debt does have its benefits since successfully paying off a business loan can help your business build good credit.
Interest rates for debt financing will vary depending on the type of loan you have. Long-term business loans have the lowest interest rates but take longer to apply for and have the strictest requirements. Short-term loans have higher interest rates and are generally given for smaller amounts of money, but are faster to apply for and are more accessible to many types of businesses.
Some types of debt financing can be harder to get than others. Business owners interested in a larger long-term business loan will need to have higher credit scores, an established business record, and possibly collateral, which makes it difficult for small and young businesses to get them. Many types of short-term loans have more relaxed requirements about things like how long you’ve been in business and your business credit score.