Raising funds and financing your business can appear daunting, but at Swoop we’ve dedicated our lives to ensuring this process is as simple and painless as possible. For a full guide to equity finance for your small business, please click here.
What Is Equity Finance?
Equity finance is the method of raising fresh capital by selling shares of your company.
You may choose to raise money for various reasons – you have a short-term need to pay bills, or perhaps you have a long-term requirement for funds to invest in your growth. By selling shares, you sell ownership in the company in return for cash. The people who buy the shares then become your shareholders.
An important thing to remember about equity financing is that it’s different from debt financing, which refers to funds borrowed by a business. In debt financing, you acquire a loan which is paid back over time with interest, while in equity financing you sell ownership shares in exchange for funds.
It is common, in
order to meet liquidity needs, for organisations to raise funds via both equity
as well as debt financing.
Where does equity financing come from?
Equity funds can come from many sources such as business owners themselves, friends and family, venture capitalists and angel investors, crowdfunding, or through an initial public offering (IPO). There are a number of incentives encouraging equity investors to push funds into startup businesses, which you can read more about here.
One of the most sought-after early-stage methods of raising cash for a startup is via venture capital. This financing is a method of raising money through funds looking at diverse investment opportunities deemed to have high growth potential. Venture capitalists and angel investors are generally the first investors in a startup.
As your business startup grows into a successful company, it is likely you’ll have several rounds of equity financing. Generally, businesses will attract a different form of investor at the various stages of their evolution in order to meet financing needs.
Once your company grows large enough to consider to go public, the venture capitalists can use the opportunity to sell their stake to institutional investors at a premium.
Should you choose to go for equity finance to meet your liquidity needs you must have prepared to demonstrate your business, planning and financial models in a clear and engaging way. Swoop help thousands of small businesses get investor ready, for more information please click here.
Whatever your funding requirement is, and whatever stage you’re at, our team would be delighted to chat you through your options. Just drop us an email at email@example.com or register your business at here.