Why is debt a comapratively cheaper form of finance than equity?

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Because debts only need to be paid back (with interest). Equity, you are presumably giving away something much more valuable than the money provided.

For instance, say you are financing a start-up company. If you can borrow the money (debt) then you are committed to paying it back. If you perform equity financing then you are giving away part of your company.

Presumably the shares of your company will pay off for many years. And, if the company's prospects are uncertain, then the lender will want additional guarantees anyway, so it'd be like a debt then, with more potential upside for the "lender".

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