Although credit is part of the capital of a company, in no way be regarded as the most important to start a new business. Although there are better options for financing an emerging company, many experts suggest that certain forms of debt and equity are the financing options that allow growth to a new company without diluting the heritage of its founders. These thinkers claim that the debt for a year or less can be paid with proceeds from the sale of products and services company, and debts of about five years to be used as working capital to buy equipment or property to the company. The finanaces in exchange for equity reached its existence to cover the types of funding not covered by banks, and can help eliminate some risks that could cause the company was a debtor who is weak to reject the claims. For example, a company could obtain a personal debt to the heritage of one of its founding members and so enter in the credit system, allowing you better access to financing in the short term and reduce the mistrust and suspicions of the lenders that the company, not having tested its solvency, its operational capability or cost effectiveness make it susceptible become a potential delinquent. Many banks would deny a medium-term credit even if he has fulfilled a personal collateral loan. Unfortunately, it is even more difficult to get financing through the equity that in exchange for a debt, as investors on the level of wealth does not expect a return in the short term and in the case of monthly payments on a debt financing.
What they expect is a fluid communication with the company’s reports and details of their progress as they need to know whether they are meeting their predetermined plans and whether they expect a higher return than that obtained through credit. For this reason, the equity-related financing is more suitable for companies which, although new, expect a high exponential growth, as well as venture capital funds and strategic alliances. Discuss issues such as whether you want a creditor or a partner, what kind of return can offer the company, how much the assets would be divested, etc. is essential to decide what is best for each business.