Laminar Team · 5 min read
If you're building a CPG or DTC brand, the default fundraising playbook is familiar. Find investors. Pitch your story. Raise a round. Give up some ownership. Repeat.
But here's something that doesn't get talked about enough: for many product brands, debt is the cheaper and smarter choice for a significant portion of their capital needs. Not all of them. But more than most founders realize.
The trick is knowing when each type of capital makes sense.
The real cost of equity
Equity feels free because there's no monthly payment. No interest rate. No term sheet to repay. But it's actually the most expensive form of capital a business can take.
When you sell 20% of your company in a seed round, you're not just giving up 20% of today's value. You're giving up 20% of all future value. If your brand grows to $50 million in revenue and you sell the business, that 20% could be worth millions more than any loan would have cost.
Equity is also permanent. You can pay off a loan. You can't un-dilute yourself.
This isn't an argument against raising equity. There are times when it's absolutely the right move. But it is an argument for being intentional about what you use equity for and what you fund with debt instead.
When equity makes sense
Equity is best suited for spending that doesn't generate immediate, predictable returns. Think brand building, R&D, team hiring, new product development, and market expansion into unproven channels.
These are investments where the payoff is uncertain and the timeline is long. A lender isn't going to fund your rebrand or your first year of retail marketing. That's not what loans are for. But an investor who believes in your long-term vision might.
Equity also provides something debt can't: patience. There's no repayment schedule. If a product launch flops or a retail partnership takes longer than expected to ramp, equity doesn't come knocking asking for its money back.
And in the CPG and DTC world, the right investor brings more than money. They bring introductions to retail buyers, connections to agencies and distributors, and operational experience from building similar brands. That strategic value is real and worth paying for.
When debt makes sense
Debt is best suited for spending that generates predictable, near-term returns. The classic example for product brands: inventory.
You know what your COGS are. You know your margins. You know (roughly) how quickly the inventory will sell. This is exactly the kind of predictable cash flow that debt is designed for. Borrowing $200K to fund a production run that will generate $400K in revenue over the next six months is straightforward math.
Other good use cases for debt include funding confirmed purchase orders, bridging the gap between shipping goods and receiving payment, covering seasonal inventory builds, and financing equipment purchases.
The key criteria is predictability. If you can reasonably forecast the return and the timeline, debt is almost always cheaper than giving up equity.
In 2025, venture debt deal volume reached $53.3 billion, nearly doubling year over year. More founders are catching on to the idea that debt isn't a sign of weakness. It's a tool for preserving ownership while funding the things that scale a business.
The blended approach most smart founders use
The best-funded CPG and DTC brands don't choose between debt and equity. They use both, strategically.
The pattern looks like this. Raise equity for the things that require patience and don't have immediate payback: building your team, developing new products, investing in brand. Then use debt for the operational cash needs that have clear, short-term returns: inventory purchases, PO fulfillment, bridging receivables.
This approach lets you stretch your equity further. Instead of raising $2 million and using half of it on inventory, you raise $1 million for brand and team, then use a $500K line of credit or PO financing facility to cover inventory. You've given up less ownership and still funded everything you need.
The math gets even more compelling as you grow. A brand doing $5 million in revenue with 50% gross margins has very bankable cash flows. Lenders will compete for that business. Giving up equity to fund inventory at that stage is almost always a mistake.
What type of debt fits product brands best
Not all debt works the same way, and product brands have specific options that are well suited to how the business operates.
Asset-based lending lets you borrow against inventory and receivables. It's flexible, revolving, and scales with your business. As your inventory grows, your borrowing capacity grows with it.
PO financing covers production costs on confirmed orders. The lender pays your supplier directly, and you repay when your buyer pays the invoice. This is perfect for brands scaling into retail.
Invoice factoring gets you paid on outstanding invoices without waiting 60 to 90 days. You sell the invoice at a small discount and get cash within 48 hours.
Revenue-based financing provides a lump sum that you repay as a percentage of monthly revenue. The global RBF market has grown explosively, from $901 million in 2019 to a market expected to reach over $42 billion by 2027. It's popular with ecommerce brands because repayments flex with sales.
Each of these products has different costs, terms, and requirements. Comparing them side by side is hard when every lender quotes differently. Laminar normalizes these offers so you can see the true cost of each option and pick the right mix for your situation.
How to know if you're ready for debt
Lenders want to see a few things before they'll extend credit to a product brand.
Revenue matters. Most lenders want to see at least $100K in annual revenue, and many prefer $500K or more. A track record of consistent, growing sales makes you a much stronger candidate.
Clean financials matter. Accrual-based accounting, clear COGS tracking, reconciled books. If a credit analyst can't understand your business in 15 minutes, your rate goes up or your application gets declined.
Margins matter. If your gross margins are below 30%, the math on debt gets tight. Most lenders want to see healthy margins that leave room for repayment without squeezing the business.
And having a clear use case matters. "We need working capital" is vague. "We need $150K to fulfill a confirmed PO from Whole Foods with net-60 terms" is specific, and it's the kind of request that gets approved quickly and at better rates.
The bottom line
Equity isn't always the answer. For predictable, operational spending like inventory, production, and receivables, debt is almost always the cheaper and smarter path. The founders who understand this preserve more ownership and build more valuable businesses over time.
If you're not sure which mix of debt and equity makes sense for your brand, start by understanding what's available. Join our waitlist to see how Laminar helps CPG, DTC, and ecommerce founders compare debt options and find the right fit.