Conventional banks have been the to-go source for many businesses. Nowadays, you can decide to invest your money or private money in your enterprise. This form of financing is known as equity financing. Here is an insight into the merits and demerits of equity finance.
With the growth of popularity of equity, finance comes multiple advantages. They include;
1. No debt
Repaying bank loans can be hectic, especially when there are market disruptions. With equity finance, you do not have to worry about debt repayment. This also makes it easy to expand your business.
2. Additional funding
After securing the initial funding, you can get additional money from investors who wish for the business to grow and prosper.
When engaging with venture capitalists and angel investors, you are bound to accrue a wealth of knowledge in running businesses. This gives you a competitive edge over other firms.
Equity finance might be resourceful to business owners, but it has its fair share of demerits. Some of the cons include;
1. Poor relationships
If you decide to take money from friends and family, you jeopardize your relationship, especially when things go south. It may, thus, take time to mend broken relationships with angel investors.
Reaching out to private investors is not for the faint-hearted. You have to take time to pitch your idea and deliver an excellent presentation. This can take a toll on your time and money meant to boost your business operations.
3. Relinquish control of business
Unlike bank loans, equity finance involves shared ownership of your business. As an entrepreneur, you are expected to consult with other shareholders before making decisions in day-to-day operations. This makes it cumbersome to make quick decisions.
Before jumping on the bandwagon of equity finance, it is advisable that you weigh your options. As you undertake analysis, make sure you liaise with Park Cedar Commercial professionals for more info.