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Types of Financing and Sources of Funding

3. Equity Financing

3.2. Debt Financing

Debt financing is when a startup business borrows money from lenders, such as banks, and must pay it back with interest. This type of financing allows the business to keep ownership of the company and use the borrowed funds to grow the business.

Debt financing can be useful for startups that have a well-defined business plan, a concrete goal for the business, and the ability to generate consistent cash flow.