In every business, capital is the main wheel that enables the entire business to run on the proper track, in the right direction. Financing options depend on what kind of business you have. Its age, position, performance, market opportunities, team, and so forth are very important. So, you should tailor your funding search and your approach.
Mostly, a company raises funds from two sources: creditors or investors.
Is an investor a creditor?
A creditor is like a bank. They will give you money to borrow at a certain interest rate and expect to receive their money back plus the interest fee on a certain date.
An investor is involved in both, debt and equity financing. When they give you money, they are also interested in getting it back, but not for a small interest rate. They want to receive a multiple of their capital back.
Who are preferential creditors of a company?
A company has creditors who either lend you money or lend you work, i.e., the employees. The preferential creditors of a company are those who are on the priority list of payments to be made. They are repaid in any situation, whether it be profit or loss for the company. To know about who are preferential creditors, read here.
Creditors or Investors?
To choose between creditors or investors for your business, you must know the difference in their roles for your business.
Read below to know the difference in roles of an investor and creditor:
Once you know their roles and importance for the company, preferably companies chose to go for investors. In that case, if your business has lots of creditors and you are willing to transform them into investors, read:
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Contributor: Amrita Sinha
Amrita is in the field of media. She has a deep inclination towards writing and public speaking. She has the aim of removing the stereotypical mindset of society. She loves to read and photography is her passion.