January 2025, by Samuel Hoffman
Let's be real...
If you’re a business owner looking for capital, there are two core ways to get it: debt or equity. You either borrow money and pay it back, or you sell part of your company and never get it back.
And while giving up equity might sound appealing — “no repayment, no interest, just a check” — it often ends up being the most expensive deal you’ll ever make.
Here’s the breakdown.
Funding = Leverage
When you use debt — whether it's a term loan, line of credit, SBA facility, or even short-term capital — you’re using someone else's money to build your business while retaining 100% control.
- You pay interest. You pay fees. But you keep your equity.
- Once it’s paid back, it's over — no one owns a piece of your company.
Let’s say you borrow $150,000 at 12% over 18 months. You pay back about $180K total.
Cost of capital? $30K.
But your business now earns $1M in annual profit, and it’s 100% yours.
Selling Equity = Permanent Dilution
Now let’s say instead of borrowing, you sell 20% of your company to an investor for that same $150K.
- No payments. No interest. But now you don’t own your business outright anymore.
- That 20%? It’s gone — for life.
Now your business hits that same $1M annual profit.
Guess what? You’re now paying your investor $200,000 per year, forever.
And if you ever sell the business? 20% of the exit value is gone too.
Cost of capital? Potentially millions.
When Equity Might Make Sense
To be fair, equity can be the right move if you’re a startup with no revenue, no assets, no cash flow — and massive upside potential.
Think tech plays, VC-backed rollups, or pre-revenue ventures with a big runway.
But if you already have:
- Revenue
- Repeatable cash flow
- A product that’s selling
- A bankable business
Then funding wins every time. It’s faster, cleaner, and doesn’t require you to give up ownership in your own vision.
Most Business Owners Get This Wrong
They think debt is scary — and equity is safe.
But here’s what I tell my clients:
“Selling equity to cover working capital is like selling 30% of your house to pay for a roof repair. You just gave up part of the asset — forever — for a short-term fix.”
That’s not strategic. That’s expensive.
Final Word
You don’t build wealth by giving away pieces of your company. You build it by leveraging capital, growing margins, scaling operations — and keeping your upside.
If you have a real business, with real revenue, there are lenders (like me) who can structure the capital you need — without taking a single share of equity.
Let’s run the numbers together.
If you’re a business owner looking for capital, there are two core ways to get it: debt or equity. You either borrow money and pay it back, or you sell part of your company and never get it back.
And while giving up equity might sound appealing — “no repayment, no interest, just a check” — it often ends up being the most expensive deal you’ll ever make.
Here’s the breakdown.
Funding = Leverage
When you use debt — whether it's a term loan, line of credit, SBA facility, or even short-term capital — you’re using someone else's money to build your business while retaining 100% control.
- You pay interest. You pay fees. But you keep your equity.
- Once it’s paid back, it's over — no one owns a piece of your company.
Let’s say you borrow $150,000 at 12% over 18 months. You pay back about $180K total.
Cost of capital? $30K.
But your business now earns $1M in annual profit, and it’s 100% yours.
Selling Equity = Permanent Dilution
Now let’s say instead of borrowing, you sell 20% of your company to an investor for that same $150K.
- No payments. No interest. But now you don’t own your business outright anymore.
- That 20%? It’s gone — for life.
Now your business hits that same $1M annual profit.
Guess what? You’re now paying your investor $200,000 per year, forever.
And if you ever sell the business? 20% of the exit value is gone too.
Cost of capital? Potentially millions.
When Equity Might Make Sense
To be fair, equity can be the right move if you’re a startup with no revenue, no assets, no cash flow — and massive upside potential.
Think tech plays, VC-backed rollups, or pre-revenue ventures with a big runway.
But if you already have:
- Revenue
- Repeatable cash flow
- A product that’s selling
- A bankable business
Then funding wins every time. It’s faster, cleaner, and doesn’t require you to give up ownership in your own vision.
Most Business Owners Get This Wrong
They think debt is scary — and equity is safe.
But here’s what I tell my clients:
“Selling equity to cover working capital is like selling 30% of your house to pay for a roof repair. You just gave up part of the asset — forever — for a short-term fix.”
That’s not strategic. That’s expensive.
Final Word
You don’t build wealth by giving away pieces of your company. You build it by leveraging capital, growing margins, scaling operations — and keeping your upside.
If you have a real business, with real revenue, there are lenders (like me) who can structure the capital you need — without taking a single share of equity.
Let’s run the numbers together.
Share with us your thoughts
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Take the next step with United Capital America LLC
