Sourcing money may be one of the reasons. Equity financing means selling the company shares to raise capital assets. Investors who come forward to purchase the shares have become one of the reasons for such a company’s success. Officially, the investors receive dividends depending on the way the investment is made.
The company can make sales of any equity instruments such as share warrants, common stock, or preferred shares. Equity financing is useful to businesses from the company’s startup to initial operating expenses. Depending upon the size and type of business, the financial needs vary from one another.
In this article, you are about to see the major sources of equity financing.
7 Sources of Equity Financing
Equity financing exchanges the partial ownership to the investors and receives a share in the company’s profit. However, the process will take place formally before buying stocks from the company. The source of financing may be of any kind in the following listed:
1. Angel Investors
Angel investors are wealthy individuals with high net worth who offer financing to start-ups. They are not only lending financial support but also provide the extensive knowledge, experience, and skills to develop the company in the early stages. The investment from Angel investors is the initial source of funding that the companies will secure.
2. Venture Capital Firms
Venture capital is mostly suitable for high-growth businesses and they are more likely to be known as private equity finance. Compared with BAs, Venture Capital firms typically invest large sums of money to receive a larger stake in return. They are a group of investors who grow at a rapid pace.
3. Initial Public Offering (IPO)
Mostly the established companies take funds from Initial Public Offering (IPO). It allows companies to fund their available shares to the public and let them trade in the capital markets. This is one kind of resource IPO is doing.
4. Crowdfunding
In this digital era, you can find a huge number of online investment platforms established to help businesses. One among them is crowdfunding raising small investments from a large number of investors. This type of funding begins with the intent of reaching your estimated goal.
5. Corporate Investors
Corporate investors are one of the equity sources offering investment to private companies on their official needs. They are larger companies created to build a strategic partnership between the businesses.
6. Private Equity Firms
Private equity firms refer to the investment management company providing essential funds to startups or operating companies. It may be of any type of affiliated investment strategy like growth capital, leveraged buyout, or venture capital.
7. Stock Markets
Some businesses can join a stock market or public market. They allow companies to access capital, which is one of the routes to raise funds for future business development.
Check out our article on the Advantages and Disadvantages of Equity.
Conclusion
Equity financing is advantageous for businesses looking to fund assistance. It may be a startup or operating company established to evolve. The aforementioned list of financing resources may help you out. It is advisable to choose the best that typically satisfies your business requirements and needs. Because it may not allow you to wait for longer.