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Small Business Investing

Investing in a Small Business

If the target company has no debt, isn’t an investment in equity less risky?

To a degree, if you are investing in a company with no debt (now), it may appear to be less risky. But the new company may require capital in the future, and may expose itself to debt obligations, for which the equity owner will be responsible. And as stated above, debt holders are normally first in line to be repaid, followed by equity holders, so the risk may present itself in the future, and should be included in your valuation of a company before completing an acquisition.



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