2016-12-02 00:00:00 Equity English Equity financing allows businesses to raise capital. Find out how it works and what its advantages and disadvantages are. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/03/08214723/business-owner-after-raising-funds-through-equity-financing.jpg What Is Equity Financing?

What Is Equity Financing?

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Equity financing is a financing method where a company sells shares of its ownership to raise capital. Large public companies and small private businesses can use equity financing to raise funds.

For example, to raise the money to buy an important piece of equipment, you sell one-third of the ownership of your small business to your brother. This process is considered private equity financing.

The advantage of equity financing is that a business doesn’t have to pay back the funds it raised, because the funds aren’t a loan. The disadvantage of this financing method is that a business owner has to give up part of the ownership of the business. The new owners may have different business interests, and the divergence of interests could lead to conflicts.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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