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THE GREAT DEBATE: DEBT VS. EQUITY w. TOM KLAUSEN AND SCOTT SINCLAIR EP. 149

Updated: Sep 28, 2023




Choose your side – debt or equity financing and get ready for a battle! Aspiring entrepreneurs and business owners looking to scale operations, this episode is for you.


On this special episode of the Insider’s Guide to Finance, we dive deep into the heart of one of the most contentious topics in the business world.

Tom Klausen, President of True Viking Finance, and Scott Sinclair, President of Sinclair Range are back on the show to discuss the nuances of debt and equity.


“The equity game and searching for that perfect partner, investor, shareholder, and whatever you talk about [is] a difficult dance.” — Tom Klausen [0:06:15]

Debt and equity are two common methods of financing a business. Each option has advantages and disadvantages, and the choice between them depends on various factors.


Tom and Scott debate the value of equity, the risk associated with debt, and the reasons most businesses fail. We discuss the evaluation game, and using debt to grow an insolvent business.


“Every time you are talking about [equity] percentage, you are a fool. You need to talk about economics.” — Scott Sinclair [0:23:55]

The episode unpacks leveraging debt and equity together, why equity is a last resort for pre-revenue businesses and the cost of capital. You'll also learn about issues about equity and much more.

We hope you learn something valuable from this debate – from both sides! Enjoy the show.



KEY POINTS FROM THIS EPISODE:

  • An overview of equity and why it is Scott’s preferred way to finance.

  • Tom provides his perspective on equity and why he disagrees with Scott.

  • Instances where equity works for raising capital.

  • Tom explains what debt is and why he prefers it over equity.

  • The benefits and limitations of leveraging debt.

  • Insights into the correct approach for using debt and equity.

  • Why equity is the best method for growing a business.

  • What happens when a business defaults on its debt.

  • They debate the main causes of business failure.

  • Common misconceptions about debt and equity.

  • Different ways of accessing debt and equity.

  • We unpack hybrid financial solutions; mixing debt and equity.

  • Essential considerations for choosing the equity path.

  • Final takeaways that Tom and Scott have for listeners.

LINKS MENTIONED IN TODAY'S EPISODE:


For more information on our sponsor, please visit Olympia Trust Company


Please note that the information contained in this interview is not financial advice but for entertainment purposes. I am not a financial advisor and make no warranties or representations concerning the accuracy or suitability of the information contained in this interview. I recommend that any and all investment decisions be made with the advice of accredited investment advisors.


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