Effective Expense Management to Boost Profitability

Weekly Tax Tips

Trivia Question❓

Which iconic entertainment company was founded in 1923 with just $500 borrowed against a secondhand camera?

Answer at the bottom of the newsletter

The Tax-Smart Way to Fund Business Growth: Debt vs. Equity

As a business owner, you know that growth requires capital—but choosing how to raise that capital can have a massive impact on your bottom line, especially when it comes to taxes. Whether you’re launching a new product, expanding into a new market, or simply scaling operations, the question remains: should you fund your growth through debt or equity?

At first glance, bringing on investors might seem like the “cleaner” option. You get capital in exchange for a slice of your business. There are no monthly payments, no interest obligations, and less financial strain in the short term. But that equity comes at a cost. You’re giving up ownership, future profits, and possibly control. Worse yet, equity financing offers no tax deductions. The funds you raise this way are not taxed—but you also can’t write off dividends or distributions you pay to investors. In fact, once you're profitable, giving up equity can be one of the most expensive decisions you'll ever make.

Debt financing, on the other hand, often gets a bad rap. No one loves taking on debt—but from a tax standpoint, it can be surprisingly smart. The key benefit? Interest on business loans is tax-deductible. That means every loan payment you make reduces your taxable income. If you're in a 35% tax bracket, a $10,000 interest payment could save you $3,500 in taxes. That’s real money that stays in your business.

Plus, with today’s relatively low interest rates (especially on SBA-backed loans), smart borrowing can fuel growth without compromising equity or long-term upside. And since you retain full control of your company, your decision-making power stays intact.

Of course, no strategy is one-size-fits-all. If your business is cash-flow positive and stable, debt may be a powerful tool to fund growth while minimizing your tax burden. If you're still proving your model and can’t support regular repayments, equity may be necessary—but even then, structuring those deals with the future tax implications in mind is critical.

Before you sign the dotted line on a loan or a term sheet, ask your CPA: “What are the tax consequences of this capital?” That one question could save you thousands—and protect your ownership in the business you've worked so hard to build.

Bottom line: Don’t just raise capital. Raise it strategically—with your future profits and tax savings in mind.

💡 Answer to Trivia Question:

The Walt Disney Company. Walt and Roy Disney used the small loan to create their first animation studio, which eventually grew into a global entertainment empire.

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