What is the difference between debt and equity crowdfunding?
Debt crowdfunding is when investors lend money to a company, who then repays the investor on a regular basis. The company has to pay their debts before taking any profits, and if the company went under then debtors would get paid first. So this is a lower risk form of investment than Equity (see below).
Equity crowdfunding is when investors buy shares in a company and become part owners. They make a return on their investment either by being paid a dividend OR by selling their shares at a later date, when the company value has increased. The board of the company will decide whether to pay a dividend and how much, and if and when to sell the business, so this tends to be a higher risk form of investment as there is no guarantee of amounts or timescales for returns. Equity investments should have higher returns than debt investments, to compensate for this higher level of risk.