Equity finance provides an injection of funds by selling shares in your business.
- Funds don’t have to be repaid
- Often investors will assist you in your business
- Increased capital in the business will improve credit ratings
Equity Finance is provided to companies that are or have the potential to be fast growing. Equity investors are looking at a return usually over a 5 to 7 year period when the company may be sold or floated on the stock market. The company, in return for the equity investment, provides certain rights to the investors. This may be representation on the board, making annual payments or the right to be consulted on key decisions. Some investors may be willing to provide consultancy or mentoring to help you further develop the business.
In order to raise equity finance you will need to find suitable investors and persuade them to become shareholders. This requires a thorough business plan with financial projections illustrating the ability of your business to generate returns on the shareholders’ investment.