Transcript
ABCS OF EQUITY FINANCEBY:
JEFFREY HARVEY
What Financing Options Are Available?
• Self/Cash Flow Financed• Personal Loan• Bank Loan or Institutional Debt• Equity
What is Equity Financing?
• Sale of stock, membership, partnership or other ownership interests of the entity
• Trading ownership for cash or other property of value
• May be for a common interest of a preferred interest with certain preferential rights
What are the Benefits of Equity Financing?
• No specific obligation to repay by a certain date
• Funds typically unrestricted for use• Assets not tied up or encumbered as
collateral• Typically limited reporting requirements
and no performance covenants
What are the Costs of Equity Financing?
• Reduction or dilution of ownership• Potential reduction in or sharing of control• Possibility of having to answer to or
involve a “partner”• Attention to interests of minority owners
For What Type of Businesses May Equity Financing be the Better Option?
• Little or no valuable assets for collateral• Growth businesses – able to “grow the
pie” faster than dilution• Multiple owners offer greater skill sets• Inconsistent revenue or cash ability for
installment payments
What are your Circumstances?
[Open Discussion and Examples]
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