Let’s take a deep dive and truly understand the difference.

Equity vs. Debt: The Major Distinction

The first move when starting many businesses is to decide between equity or debt financing. Read on for our full-service business solutions for thoughts on the matter. When our team was asked for thoughts regarding giving up equity vs. paying off loans, they said, “the economics for early-stage operators in high growth scenarios is pretty straightforward.”

Let’s say an operator is generating $3 million per year in revenue and has a new opportunity to double that size within the coming 12 months but needs $1 million in working capital to attain that goal. Now let’s say an investor might value that company at 2x revenue = $6 million in value. To raise that $1 million, the operator would have to give up 14% of their company (1 divided by 7). Once they double in size, the company is worth $12 million, equating to 14% of $12 million = $1.68 million. They would have given up $1.68 million of real value just for that $1 million and will need another $2 million now to double again, and so on and so forth until they lose control of their company.
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Debt Makes it Simple

Put simply, even if said operator were to borrow $1 million and pay 50% interest (repay $1.5 million), the long-term cost is cheaper, and they can keep 100% of their equity and control. And, most importantly, as a borrower in good standing with us, we can refinance or extend credit through our other product types, all of which are cheaper than equity solutions.

eQcho Capital offers creative solutions that help avoid expensive equity options. The team assesses the risks and provides safe and affordable alternatives for each of its clients. We can fund up to $50 million in fully non-dilutive unsecured and secured options.

eQcho Capital is one of the only lenders processing unconventional loans to provide completely uncollateralized working capital financing to licensed operators and ancillary companies. Our team works hard to understand the needs of every borrower and seeks to customize its offerings for each of its clients’ needs.