Choosing the right financial instrument depends on various factors:
Stage of Business: Early-stage startups might prefer equity financing to avoid the burden of debt repayment, whereas more mature businesses might opt for debt to retain control. Cost of Capital: Consider the interest rates and return on investment expected by investors. Equity might be more expensive in the long run compared to debt. Risk Appetite: Evaluate the financial risks associated with each instrument. Debt increases financial risk due to mandatory interest payments, while equity spreads the risk among shareholders. Market Conditions: Current market conditions can influence the availability and cost of different financial instruments.