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Outside financing is the issuance of debt or equity from a source outside of the company. Debt financing is when a company gets financed by issuing debentures which they have to pay back after a certain period of time. It is called debt financing because the company is in debt to the bond holders and if they were go bankrupt, the bond holders would have claim to any remaining assets.

Equity financing is when a company decides to give up ownership in the company to raise funds. This is usually done by selling company stock to investors through an underwriter (investment bank) or with no middle man(DPO.) Both forms of financing have their positives and negatives so it is really up to the owners to decide which type of financing to use. Outside financing is also known as external financing.


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