Which financing instrument typically requires repayment with interest and does not involve giving up equity?

Which financing instrument typically requires repayment with interest and does not involve giving up equity?

• A. Grants
• B. Loans
• C. Angel investments
• D. Equity crowdfunding

Answer: (B)

Debt financing versus equity financing is the idea being tested. When you borrow money, you repay the principal plus interest over time and you don’t give up ownership in the company. The instrument that matches this pattern—money received now with a required repayment plus interest and no equity given to the lender—is a loan. The lender earns return through interest and does not become a owner of the business. Grants, by contrast, provide funds without the obligation to repay and typically without taking equity. Angel investments and equity crowdfunding involve selling ownership stakes to investors, so they gain equity rather than simply receiving repayment with interest.

Debt financing versus equity financing is the idea being tested. When you borrow money, you repay the principal plus interest over time and you don’t give up ownership in the company. The instrument that matches this pattern—money received now with a required repayment plus interest and no equity given to the lender—is a loan. The lender earns return through interest and does not become a owner of the business.

Grants, by contrast, provide funds without the obligation to repay and typically without taking equity. Angel investments and equity crowdfunding involve selling ownership stakes to investors, so they gain equity rather than simply receiving repayment with interest.