ABCs of Equity Financing

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]