Whether you are just starting or looking for funding sources for your preexisting business, equity financing can be a viable way to corral the necessary capital. Once you search for and find your prospective angel investors or crowdfunding sources, you should be ready with a flexible equity financing proposal. Flexibility is key, of course, since you are the one seeking the capital and they are seeking recompense in the form of equity (partial ownership).

Debt Avoidance Through Equity Financing

The ability to eschew undertaking debt is easily the best rationale for pursuing equity financing. Since you will have to give up an alternative, the only thing this could be are “shares” of your company/business. By undertaking equity financing, you are effectively becoming a stock that is traded on a private, exclusive market – and only you get to choose the stockholders.

Equity financing helps business owners raise money without worrying about their ability to repay the debt. Now, to attract lofty financiers, you will need a strong proof-of-concept or functioning model, as well as a drafted (flexible) contract that takes into account the risk that the investor is undertaking. This means the amount of equity should be worthwhile, first and foremost. With plenty of opportunities available, these high net-worth individuals won’t get out of bed for a pittance insofar as equity is concerned.

Sources of Equity Financing

You can go with angel investors and/or venture capital firms. Both of these tend to have substantial amounts of cash on hand, as they are either high net worth individuals or comprised of the same. The equity required will usually be substantial, which means you will cede a lot of control over them. On the plus side, they tend to have reams of experience in the business.

Other options for securing equity financing are friends and family, crowdfunding, and small business investment companies. Unlike with the venture capitalists, the requirements aren’t so stringent with these and you will not likely need to part with 25% of your equity for the funds. Especially with friends and family.

Equity financing is big business, and you will need help from financial experts in navigating what could otherwise be a minefield. You’ve come to the right place at the Jasema Capital financial blog; drop us a line for more information.