On This PageJanuary 1997, No. 113

Issues in Funding the Activities of Small Firms through SBICs
Last Updated: 12/12/96

One of the most fundamental questions in finance is how to fund firms’ investment projects. Some firms finance investment projects by using equity, while others borrow from investors and/or financial intermediaries. Because debt and equity contracts offer different payoffs and rights to investors, how a firm finances its projects is primarily determined by the characteristics of the firm and its projects.