Debt vs. Equity: What’s the Best Way to Fund Your Business?
You need capital. Do you borrow it (debt) or give up shares (equity)?
Each option has massive consequences for your business. Get it wrong, and you could:
❌ Lose control of your company by giving up too much equity.
❌ Get buried in debt with monthly repayments draining your cash flow.
The Problem: Choosing the Wrong Funding Path
BrightSpark Tech, an IoT startup, needed £2M to expand. They went the equity route and gave up 35% of the business in a Series A round.
Two years later, they were crushing it—but their investors now controlled key decisions. When BrightSpark wanted to pivot, the board blocked it. The founders were now employees in their own company.
Meanwhile, their competitor, Nimbus Robotics, needed the same £2M but took a mix of debt and revenue-based financing. They kept full ownership, scaled successfully, and retained full control over decisions.
How a Fractional CFO Would Have Helped
🔹 Weighing the Pros and Cons of Each Option – A CFO would:
✔ Evaluate the business model to see if predictable cash flow made debt viable.
✔ Analyze valuation potential, so equity dilution was calculated, not reckless.
✔ Explore alternative funding routes (grants, venture debt, revenue-based financing).
🔹 Structuring the Best Funding Deal – Instead of saying “Yes” to the first term sheet, a CFO would:
✔ Negotiate investor-friendly debt terms (lower interest, flexible repayment).
✔ Secure investors who bring strategic value, not just cash.
✔ Ensure founders retain enough equity for future rounds.
The Outcome?
BrightSpark Tech lost control of their vision. Nimbus Robotics grew on their own terms.
