External sources of finance

Question 1

What is debt finance

Answer 1

Money lended from a bank or lending institution. It is money you must repay. (Increased risk as interest must also be payed)

Question 2

What is external equity finance?

Answer 2

Its when a business sells shares (pieces of the business) to attain profits. The money doesn’t have to be payed back, but the owner does give up part of the company to the new shareholder.