Which financing involves money borrowed to be repaid?

• A. Debt financing
• B. Equity financing
• C. Grants
• D. Licensing

Answer: (A)

Debt financing means money borrowed with a promise to repay, usually with interest, over a set period. The lender expects to get the principal back plus interest regardless of how the business performs, making repayment a core obligation. This is different from equity financing, where funds come from selling ownership shares and there’s no required repayment of the invested amount. Grants provide funds that don’t need to be repaid, though they often come with conditions, and licensing is a way to earn revenue from allowing others to use an asset, not a financing method. So the idea of borrowing money to be repaid fits debt financing best.