Arnon Dror is a name to reckon with in the world of international finance. This MBA graduate has been able to occupy the position of Vice-President in many companies. Some of these popular global organizations include Xerox, Creo Inc., Scitex, Kodak, Creo Americas and Presstek. The officials of such establishments acknowledge his services to their concerns. Almost all of them admit he is responsible for turning their organization into profitable entities. They even say his expertise extends to many diverse fields. These include cash flow management, internal controls, international taxation, ERP integration, corporate mergers, and financial planning. Today, he holds the post of Senior Operations Executive in Janus Technologies.
Arnon Dror – Why should entrepreneurs opt for debt financing over equity?
This financial expert explains it possible for entrepreneurs to raise funds from the market. They can avail many different options to get the money they need to run their businesses. These alternatives generally fall under the two broad categories. These are equity and debt financing. There are many different factors they need to consider before making up their minds. These include the valuation of their concerns, probably risks, operational goals and the amount they need. On top of this, these proprietors need to keep another aspect in mind. The owners have to incur a certain cost whatever choice they make.
This professional suggests entrepreneurs should opt for debt financing over equity. He states the following two important reasons why they should opt for this course of action:
- Retain full ownership and control of their concerns
Entrepreneurs can raise the money they need by issuing equity share to the public. Many individuals may show interest in the businesses they operate. These people may even invest their savings in such concerns. In return, they ask for a share of the profits and say in the running of the establishments. For this, the proprietors have to forgo a part of their ownership to these investors. They won’t be in a position to make independent decisions after taking this step. This situation may not be acceptable to many of them. Fortunately, this is not the case, when these businessmen opt for debt financing.
- Availing tax deductions
Under debt financing, entrepreneurs need to repay the interest charges and principal portion of their loans. However, they can record such costs as legitimate business expenses in their books of accounts. They can even claim a tax deduction on the amount they spend in this regard. This significantly reduces their overall tax liability with the Internal Revenue Service (IRS). This is not possible if they issue equity share to the general public. They need to pay tax on the profits their establishment generates. Only then can they distribute the remaining portion to their investors.
Debt financing is a necessity for entrepreneurs who want to raise money from the market says Arnon Dror. It allows them to use the funds to run their businesses at a nominal cost. In the process, they can even avail attractive tax deductions from the government. They just need to look at the above 2 important reasons to take this step. It won’t take them long to realize it’s the right decision to take.