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USES OF EQUITY FINANCING FOR SMALL BUSINESS

 

Equity financing has some special appeal of its own. The main advantage of equity financing is this can offer companies an alternative funding source to debt. This equity financing is basically used for some of the startup companies; small companies etc. There are two types of equity financing i.e.. Now the question is that why this equity financing is important for any business? The main reason is that the equity financing can be used to the finance extension as this is the way by which the companies can gain access to the huge amount of cash without having the single debt. There are lots of differences in between this debt financing and equity financing which have some uniqueness of their own. Now the question is that is this equity financing is important for our lives now a days if our business is start up one or very small company?

Here in this page we will also discuss the sources of equity financing and those are like-

  • Venture capital.
  • Business angles.
  • Financial bootstrapping.
  • Personal investment or the personal savings.
  • Commercial bank loans and overdraft.
  • Assistant of Government etc.

By this equity financing everyone has some access to the same opportunities, advancement, treatment etc which all have some uniqueness and features as well. Nevertheless, this equity financing can identify and eliminate barriers which can prevent the full participation of some groups. The prime example can be found out although the barriers can come in many forms.

Equity financing uses other people’s money for the financing businesses basically who are the company’s investors. There are different types of equity financing which all have their own features and characteristics.

  1. Initial public offering.
  2. Small business investment companies.
  3. Angel investors for the equity financing.
  4. Mezzanine financing.
  5. Venture capital.
  6. Royalty financing.
  7. Equity crowd funding etc.

There are lots of benefits of equity financing for small business and here in this web page we will discuss on this matter in an elaborate way.

Vector illustration of powerful investor giving money supporting businessman in future development.
  1. The main advantage is that this equity financing offers the companies alternative funding sources to debt by which the startup companies can acquire funding from angel investors, crowd funding, capitalists etc. so, in this case we can predict that the equity marketing is not that much risky like debt financing.
  2. This can easily accesses to the management expertise, business contracts and other sources of capital. In this manner most of the venture capitalists and the angel investors can help the small companies for generating their revenues and profitability.

There have some cons or disadvantages also of this equity financing and those are like-

  1. This equity financing can dilute the operational control and the ownership as well.
  2. This is very much lack of tax shields.

So, lasts but not the least that the equity financing can help a lot for the small business, start up businesses. These are the reasons why there are lots of importances of this equity financing now a day.

4 Comments

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