All about Equity financing

Category : Property

Finance, finance and more finance. Once the bug of starting your own enterprise bites you, one thought that constantly haunts you is "how to raise fund"?

Choose your Equity Financing Scheme?
It is you alone who have to make the choice. So, look well before you leap. Your choice will have a far fetched financial impact on your business. While choosing between Equity and debt financing you have to weigh the pros and cons of both:
- Your profit level
- Your financial risk
- Your control on votes.

Apart from various other sources of fund raising, an entrepreneur can provide finance for his business through equity financing.

What is equity financing?
Financing by selling common stock or preferred stock to investors is known as equity financing. But who will buy into your business is the million dollar question? It is difficult to find an investor who will be willing to buy.

Moreover it depends on you and only you : How much control in management would you share with the investor appeal of the business. Your personal motives for pursuing a small business will fix the value you place upon business.

Forms of business organization - what sort of organization did you form - a sole proprietorship, a limited company or a husband wife business? Are you partners willing to allow others to invest in your business?

Business combinations - cooperative arrangements with other businesses for sharing costs.

Venture capital - money and expertise for hot businesses.

SBICs - the government's venture capital businesses.

Angels - angel investor is a well to do individual whoprovidescapital in exchange of convertible debt or ownership equityand also help small businesses.

Initial public offerings - going public can mean big gains, but it's not for everyone.

Limited private offerings of ownership interests.

Franchising - a shortcut to getting started, but don't expect to run the whole show.

ESOP or the employee stock ownership plans allow employees to own a piece of the business; It encourages productivity and provide leverage for additional financing.

You may be lucky enough to have your friends and relatives by your side who as non professional investors will support you financially. But not all are as fortunate as you are. Then what? Will your dream meet an untimely death? No, there is someone else who can help you - professional.