Debt Finance

Depending on the financial status and performance of the company, it may be possible to secure debt finance. Typically this will take the form of some sort of loan or overdraft from a clearing or merchant bank, secured against the assets of the business and requiring the repayment of regular lump sums, plus interest, over a pre-determined period of time. Most traditional sources of loan will require the business to be generating revenue, or to able to show evidence of future revenue.
| Advantages | Disadvantages |
|---|---|
| Debt finance avoids the need to take on new shareholders, and therefore the potential dilution of the management team's equity stake. | If the company defaults on its repayments the lender can put the business into receivership. |
