Question

Which is a disadvantage of debt financing

Fluctuations in the currency exchange market can lead to ballooning interest payments.

Paying for the interest on a loan makes it the most expensive form of financing available.

Banks are usually unwilling to fund a business in its early stages of development.

Securing a loan involves a lot of paperwork and an extremely lengthy approval process.​​​

Answer 1

Option C, is the right answer.

Step-by-step explanation:

There are two types of financing available for companies or businesses to meet the demand for capital for business needs. These two options are known as Equity Financing (whereby, the company sells a portion of its equity in return for money) and Debt Financing (whereby, the company borrows money and returns it with interest). There are different advantages and disadvantages of both types of financing. However, the most important disadvantage of debt financing is that banks shows less interest in funding a business in its early stage or phase of development due to the risk involved in it.