Equity Finance


When operating a business, you will always require funding from one source or another. You can look for funds for a short or long term project. When you need funds for the long term, you can successfully acquire them through equity. This can be achieved when a company seeks funding from the general public by issuing them part ownership of the company and handing out share certificates as proof of this. In this time of economic recession, many companies are turning to equity finance as an option so that they can continue to conduct business. This may sound easy but it can be difficult to get an investor who is willing to take a risk and invest in your business.

One way of getting equity finance would be to have an Employee Stock Ownership Plan (ESOP). Under this arrangement, your employees can purchase shares of stock in the company. They can do this by making cash payments or having an agreement to have deductions made from their salaries. You will have extra funds to allocate to other areas of the company and your employees will be part owners of the company. It will also boost your business because your employees will be more loyal and hardworking since they have a stake in the business. It is a win-win situation for all parties concerned.

Franchising is another way of gaining equity finance. You sell your expansion rights to another party and you get initial franchise fee, service fees, equipment sale or lease fees, and royalties from the business. A venture capitalist is an excellent way to get equity finance. You get someone to invest in your business with the hope of them getting fast and profitable returns.

However, it is important that you are constantly on the lookout and take necessary measures to protect yourself and your ideas. Ensure that you understand what you are getting into and acquire the services of a lawyer before you sign any documents. In addition, use confidentiality agreements and patents.

Source by Mercy Maranga

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