Full Video Transcript
Many business owners need to raise money for their business, and equity financing is one way to do it. In an equity financing arrangement, investors provide money to a business in exchange for an ownership share in the company. While this type of financing does not leave you with a debt that has to be repaid, it still comes at a cost. You must give up some control and work with the equity owners when making business decisions. In some cases this could change the direction or profitability of your business. So it is important to carefully consider whether you want to enter an equity financing arrangement with an investor prior to executing an agreement.
That said, many equity investors are hoping to make a relatively quick profit on their ownership share of your company. They do not intend to hold on to company stock indefinitely but instead want to sell their ownership share for a profit. Of course, you never know how long your equity investor will hold on to his stock or to whom he will sell it, so that is a calculated business risk that you must be ready to make.