Equity

Equity is a method of financing your business where:

You receive a sum of money for an equity share of your business
There is no certainty that the funder will get their money back.
The funder hopes that the business will be sold at a higher valuation than they got in on, and so their share will be worth more than it was originally.
There are variations whereby the initial investment may be a convertible loan that a point in time will convert into equity.
Some equity raises can have tax advantages for the investor – Seed Enterprise Investor Scheme (SEIS) – Enterprise Investment Scheme.(EIS)

Seed funds

Equity funds

Venture capital funding

Angel investment

Equity Crowdfunding

Tier I Entrepreneur equity funding

Government regional equity funds

Sector specific equity funds

Government backed co-investment funds

You may get a funder that not only invests but also can add to the business in terms of experience/ skills / contacts

As the investment isn’t a contractual debt – there is no contractual obligation to repay the funder.

You don’t secure the funding against company assets allowing other forms of finance to use that security.

As there is no interest rate it should make the purpose for which the investment was made more -profitable

The legal costs of acquiring the finance are generally greater than when raising debt finance

The time it takes to raise the finance is generally longer than when raising debt finance