Business Finance – Choosing Equity Finance Article

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Business Finance – choosing Equity Finance

The term equity finance refers to share capital; it is money that is invested into your business in return for a share of the profit. The money that is invested doesn’t need to be repaid and there is no interest added onto it. The way in which an investor benefits from this arrangement is that they will receive a percentage of the profit that your business makes.

Author: Carolyn Clayton

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Equity finance is a great opportunity for new businesses to gain the start up finance that they need to get their business going. It will provide all of the equipment needed and provide you with the rent of your property as well as funding your staff’s wages and all of your start up bills. Equity finance isn’t however just limited to new business it can also benefit established businesses if they are embarking on a new product or service and need the funding to get it going.

Equity finance is beneficial not just because of the money that it provides to your business but also because of the expertise and all of the contacts that you will receive from your investors. The money combined with this expertise and contacts will mean that your business has everything that it needs to become a success.

When it comes to gaining equity finance there are many ways that you can go about securing it; you could approach short-listed investors directly through an introduction or contact. You could find suitable ones through networking, which is an important way of finding investors. It can also be a good idea to find suitable candidates through recommendations from your specific industry or associated networks. It is also important to remember that many private investors are interested in specific industry sectors or geographical regions. This will allow you to shortlist candidates that are suitable to your industry sector.

Equity investors are more likely to invest in a business that they feel they can trust and that has a clear business strategy. You need to provide detailed, credible and professional information to your investors, which include aspects such as historical information and financial forecasts. It is also important to state business policies, procedures and customer and supplier details.

You should try and anticipate the concerns that your investors may have and show them the benefits that their involvement and investment in your business would have; when doing this you should place emphasis on:

• The investment required
• The terms you're proposing - e.g. share of control, skills, timescale of Investment
• The ability of the management team to proceed with the plan
• The likely return on any investment

When you are presenting your business plan or idea to your investor you need to ensure that your presentation is information, relevant and engaging. If you feel that the inclusion of other members of your team within the presentation would demonstrate your businesses strength then feel free to do so. Investors will also be interested in your own personality, so make sure that you are enthusiastic and passionate about your business and the potential; just ensure that you are realistic about the prospects of your business.

About Author

Helen is the web master of Angel Start-ups, specialists in all aspects of Business Finance.

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Business Finance – choosing Equity Finance