The two videos seem to have different conclusions because they do not take the same perspective. In the video explaining debt vs. equity financing, the two individuals lay the pros and cons of each type of financing head to head. By the end of the video, one gets the feeling that debt financing is better than equity financing because no one would want to be controlled. Furthermore, the aspect of control being put at the end of the video makes equity financing sound bad. However, in the video explaining entrepreneurship, the owner of the business picked equity financing and laid out all of its benefits. She even concluded by stating that her picking equity financing was the best choice. This makes the two videos seem to have different stands.
An asset and most projects tend to increase in value with time. This means that business people who take up debt financing to finance an asset know that they will repay it. Going for equity financing will also finance the asset well. However, equity financing will mean that the initial owner does not have complete control of the asset (Thompson, 2019). This means that those who hold equity of the asset have a say of how it gets used. In my opinion, the aspect of control is why debt financing is more popular than debt financing for specific projects and assets.
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The appropriate equity financing rate for a home should fall between 4 to 8 percent. For a new car, the rate should fall between 6 and 9 percent whereas, for a used one, the rate should be between 8 to 12 percent. These rates are based on the current economy’s GDP, economic condition, and average basic salary earned by the middle-class population as this is the population with the highest number of individuals.
Reference
Thompson, J. (2019). The Advantages and Disadvantages of Debt and Equity Financing. [online] Chron. Available at: https://smallbusiness.chron.com/advantages-disadvantages-debt-equity-financing-55504.html [Accessed 16 Sep. 2019].
