Financing means collection of capital for the business organization. Fundamental ways of financing are two:
01. Debt Financing and 02. Equity Financing
Debt Financing: Debt financing means borrowing money that is to be repaid over a period of time, usually with interest.
Debt financing can be either short-term (full repayment due in less than one year) or long-term (repayment due over more than one year.
A type of Financing through the selling of a debt instrument is called Debt Financing
Equity financing describes an exchange of money for a share of business ownership. This form of financing allows you to obtain funds without incurring debt; in other words, without having to repay a specific amount of money at any particular time.
The major disadvantage to equity financing is the dilution of your ownership interests and the possible loss of control that may accompany a sharing of ownership with additional investors.
Raising money for company activities by selling common or preferred stock to individual or institutional investors.