Pros and Cons of Debt Financing in the UAE
When you plan to start up a new business and borrow money from the bank, financial institutions or any other outside lender promising to return the amount with a certain percentage, remember you will take on it. The debt itself has negative aspects at the end and most of the entrepreneurs want to get debt to start up a company and can easily finance them. If you are borrowing money from the bank then it will be a good decision for you as the banks are the great source of having debt in the UAE.
If you don’t pay debt in time, then it can become the most crucial issue for you. It is not easy to live there as a defaulter. Because debt collection Dubai with the help of debt collection agency is the second option for the creditors in order to get back their amount.
There are two types of financing, one is debt financing and the other one is equity financing. Debt financing means that you borrow money without giving up your ownership. On the other hand, equity financing means that you raise funds and trade your shares or ownership of your company to another investor. You choose one of them according to your company’s requirements.
So, before making any decision to borrow money, you should know the pros and cons of debt financing that are mentioned below;
Pros of Debt Financing
- With debt financing, you can spend the extra money on where you want to.
- It is up to you what payment method you adopt. If you pay the interest which is tariff deductible that will surely reduce your net obligations as well.
- Debt financing is although a flexible type of financing.
Cons of Debt Financing
- If you depend on debt and have a problem in raising principals in future to repay the creditor, you might get in trouble.
- Relying on your credit scale and business, you may get it tough to be qualified for a further loan.
- The collection agency of debt collection Dubai chases after you if you fail to repay your debt.