Chapter 7. Another day over and deeper in debt – leveraging the investment

Businesses have access to only two fundamentally different sorts of money: debt and equity. Super value ventures are plugged firmly into both, but it's important to understand the distinction between the two.

Equity, or owner's capital, including retained earnings, is money that is not a risk to the business. For instance, let's say that an angel invests £250,000 in your company in return for a 40 per cent equity stake. If the business is not doing well, there is no requirement to pay that investor anything. Put simply, if no profits are made, then the founder and other shareholders simply do not get dividends. The shareholders may not be pleased but they cannot usually ...

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