Small Business Equity Funding

What Are the Sources of Small Business Equity Funding?

The way you decide to raise the finance is one of the major choices you will face when you are starting a small business. Equity Funding is one of your choices.

Taking On a Partner

Depending on the terms of the partnership agreement, partners tend to work in the business with you.

They may have skills that your business desperately needs, or they might just be bringing their cash with them.

Either way, think very carefully before you sign a partnership agreement. Can you work with this person on a day-to-day basis? Do you share a common vision for the business? In business, many, many successful personal and professional relationships have been destroyed after entering into a partnership arrangement. Some work, many don't.

Bear in mind that if you take on a partner, you could well be changing the legal structure of your business. If you would like more information on partnerships as a legal structure click this link.

Offering Shares in Your Company

Another way to raise start up finance is to sell stock (shares) in your company. This option means that you are diluting the ownership of your business in return for funding.

However, shareholders tend to exercise much less control over the operation of the business than partners do. Providing the shares maintain their value and the shareholders receive a decent dividend on their shares, they tend to just let you get on with it.

Unless of course, you have a personal relationship with your shareholders, family and friends will believe that owning a slice of the business gives them the right to critique your every move!

Other Sources of Funding

If this form of funding is too risky for you (or just not available) you might want to check out the other forms of funding, like founder funding or debt financing.

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