Equity Financing
If you are starting a business or growing one, you are likely comparing options for funding your business with debt and/or equity financing. Here are some key things to consider when choosing equity financing...
Equity financing means you exchange a portion of ownership in your company for the funds you need to grow your business. Some examples of equity financing include angel investors, venture capital, small business investment companies and employee stock ownership programs.
Is equity financing your best option? Consider these things carefully before you decide:
Ownership - Are you willing to share in the ownership, profits and control of your business?
Capital - Will the capital raised through attracting new investors be enough to cover your future business expenses?
Business plan - Does your plan clearly show how your business will reach profitability? Will it peak the interest of potential investors?
The #1 thing to remember when negotiating equity financing: Never give up controlling interest of your company in exchange for funding. (If you intend to be the driving force of your business, you must retain at least 51% ownership).