This is What Equity Financing Entails

This is What Equity Financing Entails

If you have established your business for a long time now and you need to increase its funding, you could invite some of your family members, friends or business suppliers to contribute capital. You could also invite venture partners who could be willing to invest in your business for a profit. This kind of raising money is referred to as equity financing, where contributors receive rights to own your company, and you effectively loose the company management powers to them.

Inviting more players to your business makes you loose control of running it since, they will regularly be asking questions about how you are running the company. Business ventures that are candidates for equity finance from wealthy partners and entities are the ones that have a substantial foundation and have operated for two or more years. Those that show a future growing trend, and also those that allurement to emerging regional and global technological opportunities.

In order to qualify for financing, your debt equity ratio must correspond to similar business ventures in your field of operation. This will show the investors that your business is healthy. When you get this kind of funding, it would make a good business sense to use the money progressive for the purpose for which it was requested. Diverting this money could spell doom to your company operations. Keep all the records pertaining to your business, and update the investors regularly.

Its not a good scenario when investors have to keep on calling you for business updates. As far as these people are concerned, it is no longer your business, but also theirs. Upon selling shares in your company, it would be imperative to retain the majority of the shares for yourself. This will come in handy when you develop an intention of selling the business later on.

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