Equity vs. Debt Offerings

Equity vs. Debt Offerings

When raise capital, there are essential two main avenues: raise equity capital or raise debt capital. Granted there are many other ways to raise money, but under the headings and equity and debt can be found the vast majority of the world’s capital raising and investment funding.

Equity Offering

An Equity offering is essentially when a company is selling an ownership stake for the funding. Most companies in their start up phase raise equity funding as this is the fastest and most desired type of return investors like to have. Equity can consists of stock or shares of a corporation, or units for an limited liability company

Debt Offering

A debt offering is when a company offers debt securities. The company essentially promises the investor that he/she will receive an interest payment, plus the principle back at per-determined times.  The most common term used in debt offerings is bonds, or notes. Bonds are traditionally 10 years or longer for the maturity date. That is to say, a bond – at least from the ‘street’ point of view – is the term given when a company states that the maturity date will be after 10 years, such as a 25 year bond. Otherwise, if under 10 years, the term ‘note’ is often used to connote the length of the offering. Again, from 0 months to 10 years can be defined as a note offering. Either way, the terms are used interchangeably.

MFN can assist your fund or company with an equity or debt offering.

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