Debt financing is usually massively cheaper than equity financing. If you need working capital and can pay back loans with decent terms, then you should almost always prefer debt. I could be wrong, but I get the impression startups either don't understand how to leverage debt or it's just not sexy. No one gets a TechCrunch article written about their new 500k loan from Wells Fargo that they need for working capital. VCs aren't exactly keen on revenue producing startups going to a bank instead of them either.

Another possibility could be they are no where near to producing the revenue needed to make payments or pay off a loan and equity has no hard deadline or immediate revenue requirements. Unfortunately, that's kind of a terrible cycle as a company with cheap debt and revenue is likely to be built on better fundamentals than one that has no idea when it will have revenue.