Learn About Financing
There are two main ways businesses use capital: To grow the company or to run the company. Knowing the difference prevents dilution, stress, and bad financing decisions.
Equity should be used to grow the business, debt and asset-backed capital should be used to operate it.
Fundraising Structures
Trading ownership, future ownership, or special rights for capital.
SAFE (Simple Agreement for Future Equity)
An investor gives you money now and receives equity later when a major event happens, like a priced round or sale. No interest. No repayment. No maturity date.
Convertible Note
A loan that usually converts into equity later. Includes interest and a maturity date. If no new round happens, repayment or renegotiation may be required.
Priced Equity Round
You sell shares at an agreed valuation and investors receive ownership immediately.
Revenue-Based Financing (RBF)
You receive capital and repay a fixed total amount as a percentage of revenue. Payments flex with sales.
Preferred Equity
Investors receive priority over common shareholders on payouts, while founders often retain control.
Mezzanine Financing
High-interest debt with equity upside, typically used alongside existing senior debt.
Strategic or Corporate Investment
Capital from an industry partner investing for access, partnerships, or long-term alignment.
SPVs and Syndicates
Multiple investors pool capital into one vehicle to fund a specific deal or asset.
Working Capital Structures
Funding operations without giving up ownership.
Lines of Credit
Reusable capital you draw, repay, and draw again as needed.
Asset-Based Lending (ABL)
Loans secured by assets like inventory or receivables.
Inventory Financing
Capital secured directly by physical goods.
Purchase Order (PO) Financing
Reusable capital you draw, repay, and draw again as needed.
Accounts Receivable Financing
You receive cash now instead of waiting for customers to pay invoices.
Merchant Cash Advance (MCA)
An advance against future sales. Fast but extremely expensive and risky.
Repayment Structures
Interest-Only Repayment
You pay interest during the term and repay principal at the end.
Amortizing Repayment
You make fixed payments that include both principal and interest over time.
Transactional / Self-Liquidating Repayment
The financing is repaid directly from the transaction it funded.
Which type of capital is right for you?
