Financing is an act or way of providing funds for starting or running a business. Financing can also be defined as providing capital for the business. There are two types of financing namely debt and equity.
Debt financing is a popular form of financing in which the lender has to be repaid as per the agreement within the stipulated time. The money can also be collected in installments like in the case of car lenders.
Equity financing gives everyone equal rights in the business. Investors buy shares of the business and wait for it to increase as the company performs well. The reward is called dividends. The business owners might decide to sell 10% of stocks to investors for the purpose of using the money for business.
Some companies use only debt financing while the others use euqity and some try both.