4 ms·

Could you summarize what makes debt worse than having investors? I'm curious, it seems counterintuitive, with debt you don't have to give up a part of your com

• continuations 9y ago
  Debt usually comes with strict repayment schedule. If you don't have enough cash flow to meet the repayment schedule you go into default. The debt holders force you into bankruptcy. You lose the entire company.
  • erikb 9y ago
    Well, does a creditor have to push you into bankruptcy? They seldomly do, because then they can't squeeze more money or control out of you. And at the same time an investor could also push you into bankruptcy by suggesting, supporting or blocking certain decisions. It's like knight and bishop in chess. True, they work differently, but they are all just pieces on the same board, used in the same game to achieve the same goal.
• rjtavares 9y ago
  Debt can cause a liquidity problem, equity can't. Lack of liquidity (i.e. of available cash) can be a huge problem even for profitable companies, potencially causing a bankruptcy.
• abhi3 9y ago
  You have to pay back debts which can be a problem if you don't have adequate liquid assets. If you can't pay it back your company will go into liquidation where all its assets will be sold to the highest bidders and proceeds will first pay back creditors and then preference share holders, you'll be lucky if there's anything left for you after that as a founder.