Equity finance is a way of raising capital from external investors in return for handing over a share of the business. These investors invest with the expectation of a significant profit being returned on their investment, by way of dividend payments and/or selling their shares in the business at the end of an agreed period.
Equity investors can invest significant sums of money and can provide a high level of expertise from which the company can benefit.
“Over 90% of companies in which private equity has invested say that without private equity their businesses would not exist or would have grown far less rapidly. Private equity is more than just the provision of capital. Around two-thirds of businesses that have received private equity backing identified strategic direction, financial advice and help with contacts as key support they received from their private equity backers.” - source BVCA website.
The main source of equity investment for private businesses comes from either Business Angels or Venture Capitalists.
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