Many small businesses need financing to keep their operations and profitability on track. Perhaps the most common form of financing is a traditional bank loan. But, that is not the only way. Other forms of financing include alternative loans, factoring programs, venture capital infusions, and even crowdsourcing. One method you might like to have on your radar screen is equity financing.
Equity Financing Explained
In a typical debt financing program, a business owner takes out a loan from a bank, credit union or financial agent. The loan carries a specific term and interest rate. Regular monthly payment must be made until the loan is retired.
Equity financing is different. In this method, the business owner sells a stake in the company. Investors who buy in are hoping to capitalize on the future growth and profits of the business.
There are several benefits inherent in equity financing. First, the business owner is not burdened with regular monthly payments on a loan. Additionally, no interest has to be paid.
Types of Equity Financing
There are several common forms of equity financing. These include:
- Equity Purchases from Wealthy Investors, often referred to as “Angel Investors”.
- Equity Crowdfunding, which entails selling off small stakes in your business, and
- Venture Capital Purchases, who often fund higher-risk startup enterprises.
Although you won’t be paying interest and periodic installments, there is a downside to consider with equity financing: You no longer own 100% of the business. But, in many cases, the outcome is great: Your business is taken to a higher level.
Point High Finance: Your Funding Source
If you are considering equity financing for your enterprise, please contact High Point Finance. We are leaders in providing funding solutions for small- and medium-sized businesses. We can help your business too.
