I and my partner run a small e-commerce business selling a healthy spiced latte mix. We are running short of cashflow though we are seeing traction in online sales. If we take a loan for expansion, there are various things we can spend on - Digital Marketing (Which we are seeing decent results now), Offline Marketing (Bus Stop Ads/TV/Radio), Product Expansion (Which can increase our average order value, right now we only have 2 flavours), Distribution Channel Expansion (Currently we are already in 1 outlet in a major retail store in Singapore but not getting sales there). How should we allocate our funds if we were to take business loan?

Equity financing happens when you sell shares or a stake in your business in lieu of money or capital. Certain aspects of a business that need money are best tackled by a loan and others through equity. For example, if you must buy a piece of machinery for your business and need money to the purchase, a bank loan would be the most suitable way. Banks have lucrative products that are meant especially for such asset finance and can work out the best for the business. Given the equity route does not have the pressure of paying EMIs every month, a business owner has the flexibility and ease of concentrating on his business. A percentage share of the company in exchange for money is what is at the heart of this transaction and hence it becomes important for the business owner to decide how much stake he or she is willing to give for the money on offer. Ideally, no business owner wants to give away too much stake and hence it depends on what each party can negotiate. Building business profile- Both debt financing and equity can build the profile of a business, although in slightly different ways.
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Answered 3 months ago

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