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Start-up Funding: Equity or Debt?

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You’re starting a new business. Where does the money come from?

Though it’s probably best to struggle along with your own cash for a while, whilst you formulate your ideas and develop a workable business model, at some point you’ll probably need some money from elsewhere.

You have two options — seek investors who will want a slice of the business, or go to a bank and get a loan. Angel investors can offer advice as well as funding, but they’ll also own part of the business. If things don’t go according to plan they might end up with more than you’d envisaged. The bank, meanwhile, could just call in its money and see you close up shop.

Today two views on the best approach. Daniel Noble started up DriveMyCar Rentals — an example of collaborative consumption talked about by Rachel Botsman recently on BTalk. He called on angel investors to help fund the start-up. Alan Miltz is the Managing Director of Pearl Consulting and co-founder of Inmatrix, an internationally renouned financial analysis software company. Alan has helped many Aussie businesses to get a start with debt financing.

In today’s program they each talk about the benefits of the respective approaches.

First published on CBS News

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