Is scarcity of funds obstructing your venture? Are you looking for ways to finance your new business but dread the thought of monthly loan installments? If you said yes to the above, equity financing is what your business needs. Equity financing helps you raise funds without having to shoulder the burden of repayment.
It ain’t money for nothing. Sure, equity financing is not a loan, but it isn’t a gift either! When you raise equity funds, you part with an ownership interest in your company. This ownership takes the form of common stock or preferred stock. If the company makes a profit, investors receive a part of it in the form of dividend. Apart from taking a stake in the company, investors may also participate on the company’s board of directors and take an active role in managing the business. Bet that’s stuck in your throat!
While informal sources such as family and friends can provide equity financing, the most important source of professional equity funding are venture capitalists. These are deep-pocketed financial wizards in the business of investing in new or riskier businesses in exchange for very large returns. Read the rest of this entry »