If you are planning to set up a New Bsiness you must know the difference between equity financing and debt financing. Equity financing involves using owners' funds. Large companies raise equity share capital by issuing their shares to the common man. When a person buys equity shares of a company, he becomes an owner of the company and is entitled to profits and losses of the company. If you are setting up a small company, you can invite business partners to join your business and invest in it. However, in doing so, your ownership in the business dilutes.

Another source of business finance is debt finance. It includes loans and debentures. Loans are the most common type of debt finance in case of business start-ups. Lenders offer both short-term and long-term personal loans for small and new businesses. Short-term loans are usually unsecured loans and are used to run day to day business operations. Long-term loans are secured against a property and are used to buy fixed assets such as land, building and machinery. Whether you use equity or debt finance to set up your business, keep in mind that the key to success is dedication and hard work.

About the Author: The author is a business writer specializing in finance and credit products like secured loans, unsecured loans and personal loans has written authoritative articles on the finance industry. He has done his masters in Business Administration and is currently assisting Easy-Loans-Shop as a finance specialist.