Should a high growth company raise debt or equity



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Hi Binny,
Hope you are doing good.

In the below question

If you are advising a high growth company in a very competitive industry that needs to raise $5 million for growth, what would you recommend?

Is there any specific answer, as ans was 5 mmm in equity
can it be in ratios of equity/debt ?

eg: As its growing company we can raise by complete debt or in ratio of debt/equity, so that we repay interest back on debt taken and we have dilute less % of the company or viceversa. Please guide me if i m incorrect.

2 Answer(s)


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Ashish, by definition a high-growth company needs a lot of cash to grow. Hence if you take debt, then you will spend a lot of money paying back the interest every year. That money is potentially money that could go into growing the company.

If the company raises debt and spends money to pay down the debt and interest, then competitors will overtake in such an industry very soon.

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A little equity dilution 20-30% is not a big deal if that means the company can grow faster.