Choose the correct funding structure
Loans require repayment; equity normally changes ownership and control; convertible instruments may combine debt and equity features.
AI KNOWLEDGE · BUSINESS FINANCING
Business financing needs
Prepare a financing request that explains the amount, use of proceeds, repayment or ownership impact, and material business risks.
Core knowledge
Support the requested amount
Tie the amount to a business plan, expense assumptions, financial projections, milestones, and a realistic funding runway.
Disclose repayment and security terms
For debt, state proposed term, interest or fee structure, repayment source, collateral, guarantees, and priority as applicable.
What to verify
- Confirm the lender or intermediary identity, license, fees, and actual role.
- Compare total cost—not only the advertised rate—including origination, broker, prepayment, late, and default charges.
- Keep business and personal guarantees, collateral, covenants, and default remedies explicit in signed documents.
Common traps to avoid
Advance-fee financing
Do not pay large upfront fees merely for a promise of approval or guaranteed funding. Verify the provider and written refund terms.
Hidden control or dilution
Equity, warrants, conversion rights, and restrictive covenants can change control or future ownership more than the headline amount suggests.
Unrealistic repayment assumptions
Do not base repayment solely on optimistic sales forecasts. Stress-test cash flow and downside scenarios.