Equity Finance - The Benefits

When considering various forms of business funding, equity finance should be high up there on the list of possible routes, especially if your business has high growth potential. There are numerous benefits to equity finance versus debt finance. I have highlighted some of the key benefits here.

Less Risk

Equity finance carries less personal risk to your own assets. Equity investments are risk capital with no guarantees that the investor will be getting their money back, let alone make positive returns. This type of investment is not secured to any particular assets, such as property or director guarantees.

Interest Free

Unlike debt finance such as commercial mortgages or business bank loans, there is no interest applied to money raised, the risk is solely placed with the investor who is looking for a lucrative exit to make a profitable return on their investment.

Realise your goals sooner

Taking equity finance will enable your business to realise it’s goals much sooner than following traditional funding routes such as business loans, invoice finance and overdrafts. Many small business owners are often reluctant to release a stake in their business with fear of losing control when their focus should be on maximizing their growth potential as early on as possible.

More favorable terms than banks

You will often be able to negotiate more favorable, stable terms than you would through a bank. Businesses with very rapid growth and capital expenditure are often very unpopular with the banks. Banks much prefer to see steady growth projections based upon a proven business plan.

Expertise not just capital

Raising equity finance from business angels doesn’t just generate capital but often adds beneficial skills to the management team mix. Business Angels often like to take an active role in strategy and business plan execution, this intangible asset can often be more valuable than the physical cash raised.