Which financing option involves a repayment obligation?

Debt financing involves a repayment obligation because it entails borrowing money that must be paid back over time, typically with interest. This type of financing is characterized by a loan agreement or bonds issued to investors, who expect the principal amount to be returned along with interest payments according to a predetermined schedule.

In contrast, equity financing, including venture capital and angel investing, does not require the entrepreneur to repay funds to investors. Instead, these investors receive ownership stakes in the company and benefit from its profits or value appreciation, but they do not impose repayment obligations as debt lenders do. This fundamental difference highlights the necessity of repayment in debt financing, distinguishing it from other funding sources that focus on equity ownership rather than loans.