Equity financing involves selling a portion of a company’s equity in return for capital.

Debt financing involves the borrowing of money and paying it back with interest.

A grant is an award, usually financial, given by an entity to a company to facilitate a goal or incentivize performance.

There is no component of repayment of the invested funds.

Invested Funds to be repaid within a stipulated time frame with interest

There is no component of repayment of the invested funds

Financer: There is no guarantee against his investment. Startup: Startups need to give up a portion of their ownership to shareholders.

Financer: The lender has no control over the business’s operations. Startup: You may need to provide a business asset as collateral.

Financer: There is a risk of the startup not meeting the goal or objective for which the grant has been provided. Startup: There is a risk of the startup not receiving a portion of the grant due to several reasons.

While startups are under lesser pressure to adhere to a repayment timeline, investors are constantly trying to achieve growth targets

Startups need to constantly adhere to repayment timeline which results in more efforts to generate cash flows to meet interest repayments

Grants are distributed in different tranches w.r.t the fulfilment of the corresponding milestone. Thus, a status is constantly working to achieve the milestones laid down.

Capital growth for investors

Interest payments

No Return

Equity Investors usually prefer to involve themselves in the decision-making process

Debt Fund has very less involvement in decision-making

No direct involvement in decision making

Angel Investors Self-financing Family and Friends Venture Capitalists Crowd Funding Incubators/Accelerators

Banks Non-Banking Financial Institutions Government Loan Schemes

Central Government State Governments Corporate Challenges Grant Programs of Private Entities