Equity Finance Investors

In economics we all have heard such term as ‘equity finance’. But what is it? This term is concerning the share capital that is invested into different businesses for from medium to long term in return for a share of the ownership and in almost all cases an element of control over running of the business. Today there are two main types of equity finances that are available to the business - venture capitalists and business angels. Today equity finance is becoming more and more popular way of getting startup capital for businesses.

Equity finance is the perfect example of true risk capital. It happens because your investors have no guarantee to get their money back. Equity finance investors have no right to interest or to be repaid at a particular date. The way in with the equity finance investors regain their money that they have invested into the business is through taking a share of the business and a percentage of the profit from this business. Because of high risk for the equity finance investors you have to be ready to share at least 20 per cent of your profit with them. The equity finance investors are likely to invest their money in something they could trust with a clear and developed business plan and strategies.

To attract equity finance investors to your new business you need to have a comprehensive business plan with detailed marketing plan and real financial forecasts. From your business plan it have to be clearly understand how much control you are hoping to retain over your business and how much funding you are going to need. Also you have to explain in your business plan what you are using your start up finance for, if your plans are realistic and if your business is appropriate for the outside finding. After completing your business plan you have to consider the potential investors to your business.

If you are going to attract equity finance investors to gain the financial help you have to take into your mind some questions - “Are you prepared to give up some of the shares of your business as well as a part of the control over your own business?” Investors may want to hear some words about the way your business is running, so you have to be prepared to this question. Also you have to be sure in the products or services your business is offering and one of the ways you can do this is by identifying that your business is unique at selling this or that product on the market. In addition you need to have the necessary industry skills and knowledge and experience to run your business.

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