Molly’s Magnificent Fashions, Inc., has shown significant growth and profit ever since Molly’s designs became popular and in great demand. Molly anticipates continued profit, but she is short on cash since she has reinvested all of her profits back into her business. The company, which currently has one retail location, has a chance to expand by leasing space in a very desirable shopping center. It must move quickly because others are in competition for the prime location. To secure the lease, Molly needs to pay the first month's rent and a security deposit equal to one month's rent. How should she secure the lease?
Molly has different options to secure the lease. She can use debt or equity financing, which both have advantages and disadvantages. With equity, she will not have to repay the funds, but she will no longer own 100% of the business, as she will take on a partner. She could also take a bank loan and continue to run Magnificent Fashions by herself. She will have to repay the loan with interest.