Equity Financing

Equity financing is another way to gain capital to invest in your company. It involves gaining partners or selling stocks/shares of your company. Like on the hit CBC show Shark Tank, you may formally approach investors known as Venture Capitalists or Angel Investors for funding. You can go IPO (Initial Public Offering) and trade stock publicly through the stock markets. Also, you can take on partners through corporate restructuring and become a limited or general partnership with friends or family.

The bonus of this type of financing is you may strengthen your company buy gaining capital that does not need to be paid back. Your investors become part owners and given a share of the profit. If the company becomes insolvent, the investors lose their money along with you. There is less pressure than with a bank as there is no minimum payment, however investors will get snarky if there is little return on their investment for a prolonged period.

The downside of equity financing is you can lose control of your company. If you sell part of your company to an investor, you must consult your new partners before making corporate decisions. The bigger the investment, the more control you will lose of your company. If you sell anymore then 50% of your company through financing, you suddenly have a boss to answer too.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: