 As companies become more profitable, it is natural to want to expand and grow their businesses. If Starbucks was still a Seattle coffee shop with one store, very few of us would have ever heard of them. So there are three general ways to finance operations and growth. The first is through the use of retained earnings. If a company has enough cash on hand, it can use it to expand and grow the business. This is a low risk approach to growth, but often the slowest. A more common way to finance business growth is through equity financing. This is done through the issuance of stocks. This approach is usually low risk, since there is no requirement to pay dividends. But this is often the costliest of the approaches, as dividends are not tax deductible nor an expense. An additional downside is that it dilutes ownership in the business. The final approach and the focus of this and the next several videos in the playlist is debt financing. Debt financing is done through leasing, bank loans, or the issuance of bonds. This is the cheapest approach to grow the business because interest expense is tax deductible. However, regular interest payments usually need to be made and a cash-strapped business could struggle to stay in business if the debt load becomes too high. As individuals, often we want to have as little debt as possible. We would prefer to be debt-free rather than carry a debt load. This is not the same for businesses. Often a business with little or no debt is poorly managed because debt should be used to expand and grow the business. Many companies aim for about 55% of their assets to be financed with debt. Debt financing is sometimes referred to as OPM or other people's money. The concept is fairly simple. Let's say you have $1,000 and an idea for a product that you can sell. If it requires $1,000 of material and produces a finished product that can be sold for $10,000, then you can earn $10,000. Once you collect that, you can start over. But if you went to a bank and borrowed $100,000 at the beginning, you could sell your products for $1,000,000 and be far wealthier much quicker by using other people's money. However, just like individuals, companies can have too much debt. When this happens, they have a hard time paying their bills and may have to declare bankruptcy. The most common ways to use debt financing to grow a business are as follows, leases, long-term notes payable, or issuing bonds. Each of these will be introduced in separate videos.