Equity Funding - Ideal Funding For Your Business
Venture capitalists and private equity investors are very similar types of investor. They give money and guidance to start-up companies in exchange for equity. But venture capitalists invest in new projects confident that they will obtain a worthwhile payoff down the road, while private equity funding businesses look at more established companies that will offer them a clear exit strategy.
Equity funding firms invest in fewer projects and plan on maximizing profits by selling the company or going public within in less than ten years. Company owners will often make more profit and will have less hassle with private equity investors than they would by going public.
There are two major categories that you need to know about when it comes to business funding. It is debt funding and equity funding. Both of these finance options have their own advantages and disadvantages; making it more straightforward to find the company that is best for your venture in the best ways.
Debt funding is concerned with borrowed money that has to be repaid - with interest - over a certain period. Some debt funding concentrates on the short-term; other debt funding on the long term. Short-term debt funding requires the loan to be repaid within a year. In a long term the repayments will go on for over a year. With debt funding, all you have to do is make sure that you pay everything back. Debt funding comes from resources like banks and traditional lenders. Debt funding requires you to make monthly repayments with interest.
Equity funding exchanges a share of the business for cash funds. This allows you to obtain financing for your venture without acquiring any debt. Sale of equity indicates taking on investors. Many home-based businesses obtain equity by bringing in investors to make their business successful and get a return on investment.
The principal benefits of equity funding are that you do not have to pay back your investors even if your company goes bankrupt. Your business resources are not required to secure equity. A business with adequate equity will look better to lenders, investors, and similar. If you do not have to make debt repayments, you will have more cash in hand.
The main disadvantage is that you will no longer be the sole owner of the business and receive all the profits: your investors are entitled to their share. The investors may have plans and ideas that are different from yours. The tax departments in most countries don’t consider payments to investors as being tax deductible.
If you have a great idea for a business and require vc funding for it, a willing venture capitalist or business angel is waiting to help you set your business rolling. Venture funding is easy to obtain if your business has real potential.
Using Edge Venture to attract investors to your business is highly effective. Find the business funding you need from a database of hundreds of Business Angels. Visit Edge Venture now to learn more.
- Simon Murray

Posted April 30, 2008
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