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The question asked is almost always “which is cheapest”. It is the wrong one. Each form of financing takes something different, and the rate is only the visible part.
Debt takes cash, immediately
A loan is repaid on a schedule that takes no account of your seasonality. It dilutes no one and grants no say in management, but it requires security and weighs on cash from the first instalment, whether revenue shows up or not.
It is the right tool when the need is dated, costed and backed by predictable flows: equipment that will produce, a contract already signed, a known operating cycle.
Equity takes ownership, and control
An investor sets no instalments. They take a share of the company and, with it, a say: reporting, decisions subject to approval, and above all an exit horizon that will have to be organised. This is not free money: it is the most expensive money, paid later and in kind.
It is the right tool when the money funds uncertainty — a market to win, a product to validate — that no one would finance with debt.
Quasi-equity takes flexibility
Between the two sit hybrid instruments: locked shareholder loans, convertible bonds, subordinated debt. They strengthen the balance sheet in a banker’s eyes without immediate dilution, but they carry clauses — conversion, early repayment, indexed remuneration — whose consequences only become legible years later.
The question to settle before the rate
Before comparing offers, one question decides: if activity slows by thirty per cent for two quarters, which of these financings puts the company in difficulty? The answer redirects most of the files we review.