Equity investment is a way to finance many different stages of the business journey.
Equity financing is a common way for businesses to raise capital by selling shares in their business. Whether starting out or experiencing a high-growth phase, equity is one area of finance that your business should consider.
Unlike Debt finance where you pay a monthly interest and capital repayment for a fixed period of time, Equity Finance has the advantage of not having to be repaid in the near future, therefore it is not a debt burden to the future trading performance of your business.
Another advantage of utilising Equity finance is that Business Angels and Venture Capitalists can also bring valuable skills, contacts and experience to your business whilst also assisting with strategy and key decision making. You will however lose a certain amount of your power to make management decisions.
Equity investors do not have rights to interest, or to have their capital repaid by a certain date. Shareholders’ return is usually paid in dividends or realised through capital growth. Both are dependent on the business’s growth in profitability and its ability to generate cash. Because of the risk to their returns, equity investors will expect a higher return than debt providers. Where a project requires longer-term investment than conventional debt offers, equity will be the most suitable form of finance.
Essentially, you will have to decide whether you want to pay back a loan or give shareholders stock in your company.
Raising equity finance can be demanding, costly and time consuming, and may take management focus away from your core business activities. This is where we can help you, by project managing as much of the work as we can for you.
For a no obligation initial discussion about how we can help you with obtaining Equity Finance, please call us on 01572 722 938 or email us at firstname.lastname@example.org
An MBO – A management team buying out a company they already work for by using the company assets as collateral to obtain debt financing.
MBI - An external management team acquires a company and replaces the existing management team.
Venture Capitalists (VCs) look to invest larger sums of money than Business Angels in return for equity. Venture capital is most often used for high-growth businesses destined for sale or flotation on the stock market.
Business Angels are wealthy individuals who invest in high growth businesses in return for a share in the business. Business Angels can invest their own money or as part of a network. The Business Angels themselves, are often experienced entrepreneurs and in addition to money, they bring their own skills, knowledge and contacts to your company.
Crowdfunding is where a number of people each invest, lend or contribute small amounts of money to your business or idea. This money is combined to help you reach your funding goal. Each individual that backs your idea will usually receive rewards or financial gain in return.
Mezzanine finance sits in the middle between debt and equity finance, representing a third finance option which can be used alongside a standard loan, equity or both.