Sometimes small businesses have to use debt financing instead of equity financing.When they do,they discover that:
A)banks give them a lower interest rate because of their closeness to the customer and better management practices.
B)finance companies are their primary source for debt funding.
C)the cost of debt financing is often less than the cost of equity financing.
D)there are fewer lenders than investors in the marketplace,but the money is easier to get from lenders.

Question

Quizplus · Accepted Answer

Debt financing generally has a lower cost than equity financing because lenders have a lower risk than investors, who invest in a business in exchange for a share of ownership and profits. While there may be fewer lenders than investors in the marketplace, obtaining debt financing is generally easier because it does not require giving up ownership or control of the business. However, finance companies may charge higher interest rates due to the increased risk associated with lending to small businesses. Banks may offer lower interest rates to small businesses that are well-managed and have a good relationship with the bank, but this is not always the case.

Sometimes Small Businesses Have to Use Debt Financing Instead of Equity