Dumb Money Knowledge – Debt or Equity
It never cesases to amaze me. There are times when you know something and then all of a sudden, you really know it.
How to fund a business
Debt
There are two ways that you can get a business of the ground. Usually though it takes some initial capital. The normal way a small business is started is through some form of debt. This could range from using a credit card, using your savings, or even a loan from a bank. You might be surprised that using savings to start a business is a form of debt. The reason it is considered debt is because you will be foregoing future earnings on the savings and spending it now on your business. Hopefully your business will earn more than the interest you will have to pay to service your debt. Most small business are funded this way. One of the pros of funding this way is that all the value of the business is yours. One the cons is that all the risk of failure is yours.
Equity
In today's modern world (US) we now have the ability to fund our businesses with equity. For those of us who have been around cryptocurrencies for a bit, we are quite familar with this funding. What we do when we fund the business with equity, is that we sell part of the business to get capital. A pro is that your are able to spread the risk around to others. A con is that to reduce your risk, you are giving up part of the stake in the business to others.
What I Did
Initially I started out with investing my own savings into Steem and made a few dollars. After reaping some of the benefits from this wonderful set of circumstances. I decided I wanted to spread some of the risk. I got the wife and one of my children to invest some of their hard-earned money with my cryptocurrency trading. I was able to reduce some of my risk, but gave up some of the rewards. So far I'm up over 100% YTD.
BTW, everyone should be buying EOS. To me even at the price it is at moment, is a steal. The main reason I'm pumping this tokenbecause it looks like, we just might get a block chain that is going to utilize other blockchains. To me it was a very novel idea to use Ethereum blockchain to get some equity to build another blockchain, that will use other blockchains for some of its functionality. IPFS, has enormous potential to be a game changer for storing content.
Trading Derivatives?
Crypto Forex Trading
OpenLedger Referrer
Nice thoughts on debt and equity. In the end, what matters is our overall value, our assets and net worth.
Im thinking of buying EOS lately,
And I should!! Haha thanks mate.
Great article. My favorite Shark on Shark Tank is Kevin O'Leary. He seems to be of the mind, that once your business is already somewhat off the ground, at that point, its better to take debt rather than give up equity. He'll offer loans quite frequently. The idea being is that his offer is more competitive because a profitable business should not want to give up equity bc they will have to share in the profits later on. If a company is not yet profitable, but he still likes it, he won't offer debt because it may not ever get paid back, plus he would want to share in the profits through equity because he is the guy taking the company to the next level of profitability.
Also I def agree on EOS. I believe in the creator Dan Larimeer big time.
Great point about when to use debt or equity. Or when to offer debt or equity in investing in a business. It seems to me, if offering debt you woud be looking for a passsive income stream. Nothing to do on your part. If buying equity, then you are investing your time in the business. You should get paid on whatever future earnings that the business has.
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