• Funding is the process of financing a business, purchase or investment.
  • There are two types of financing: equity financing and debt financing.
  • The main advantage of equity financing is that there is no obligation to return the money received with its help.
  • Equity financing does not impose an additional financial burden on the company, although the disadvantages are quite large.
  • Debt financing is generally cheaper and comes with tax incentives. However, a large debt burden can lead to default and credit risk.
  • The weighted average cost of capital (WACC) gives a clear indication of the total cost of financing a firm.