💡 Why Companies Sometimes Choose Loans Over Equity

When a business needs money, there’s a big decision to make:
Borrow it (loan) or sell a piece of the company (equity)?

Here’s the twist:
For some companies, a loan can actually be cheaper than equity.
💰 Interest rates might be lower than the returns shareholders expect.

But…
⚠ Dividends? Optional.
⚠ Interest payments? Non-negotiable. Miss them, and you’re in trouble.

Why companies still say “yes” to loans:

• Interest is often tax-deductible.
• Ownership stays intact — no giving away a slice of the pie.
• Used wisely, debt + equity together can create more wealth than equity alone.

The trade-off?
Debt raises financial risk — If cash flow falters, loan repayments can become a burden — potentially threatening the company’s stability.

The company need to find the right mix that fuels growth without turning the risk dial too high.

#ORNA #BusinessValuation