What are the primary methods for businesses to raise capital?

The primary methods for businesses to raise capital are debt and equity. Debt refers to funds borrowed from external sources that need to be repaid, typically with interest, encompassing loans and bonds. This allows businesses to access larger sums of money that can be used for various purposes, such as expansion or operational costs, without relinquishing ownership control.

On the other hand, equity involves selling shares of the company to investors in exchange for capital. This method not only raises funds but also brings in individuals or entities that have a vested interest in the company's success. Unlike debt, equity does not require repayment in the traditional sense, but it does dilute ownership among shareholders.

The combined use of debt and equity creates a balanced capital structure that can optimize financial performance and risk management, making this approach the most comprehensive for raising capital effectively.