The in's and out's of equity financing - costs, benefits, etc.

1. ABCS OF EQUITY FINANCE
BY:
JEFFREY HARVEY

2. What Financing Options Are Available?
• Self/Cash Flow Financed
• Personal Loan
• Bank Loan or Institutional Debt
• Equity

3. What is Equity Financing?
• Sale of stock, membership, partnership or other
ownership interests of the entity
• Trading ownership for cash or other property of
value
• May be for a common interest of a preferred
interest with certain preferential rights

4. What are the Benefits of Equity Financing?
• No specific obligation to repay by a certain date
• Funds typically unrestricted for use
• Assets not tied up or encumbered as collateral
• Typically limited reporting requirements and no
performance covenants

5. What are the Costs of Equity Financing?
• Reduction or dilution of ownership
• Potential reduction in or sharing of control
• Possibility of having to answer to or involve a
“partner”
• Attention to interests of minority owners

6. For What Type of Businesses May Equity
Financing be the Better Option?
• Little or no valuable assets for collateral
• Growth businesses – able to “grow the pie”
faster than dilution
• Multiple owners offer greater skill sets
• Inconsistent revenue or cash ability for
installment payments

7. What are your Circumstances?
[Open Discussion and Examples]