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EQUITY FINANCE If you are looking to raise equity finance, you will want to know exactly what is involved and whether it is the right option for your business? Essentially, equity finance is medium to long term capital invested in a business in return for a share of the ownership and in some cases an element of control of the business. Completely different to lending institutions, equity finance investors will not have rights to interest or to be repaid at some date in the future. Their expected return is usually paid in the form of dividends and will depend on the growth and profitability of the business.Because an equity investor will share the risks your business faces - although admittedly limited to the extent of their initial investment - equity finance is often referred to as risk capital. So is equity finance right for your business? There are different forms of equity finance that will suit different business situations. For example, the alternative to equity capital is venture capital and is most commonly used for high growth businesses that are destined for flotation on the stock market.
Before an equity finance company will begin to look at a proposal to raise cash they will expect you to submit a clearly written proposal, together with up to date financial accounts, cash flow forecasts for the next 12 months at least and probably for the next 3 years and in many cases a 3 - 5 year business plan. As with many things in life, there are professionals that can help you to write your outline proposal for equity finance , but this type of service will carry a reasonable price tag and you must also consider that whoever writes your equity finance request will ask you to invest a reasonable amount of your time to gather all the information.
 Equity finance is a good way of releasing cash in exchange for equity, but many business owners will be reluctant to allow third parties to take a stake in their company. It is important to recognise that someone who is prepared in your business is not going to be prepared to just sit back passively without any ongoing involvement in your business, so you need to be prepared that you will no longer be the only decision-maker. As a minimum, you are going to find it necessary to involve your financial backer in major investment and business decisions in the future - after all, they're going to be shareholders, so why wouldn't they? There are all sorts of ways of injecting capital into your business and equity finance is just one financial instrument. You might also want to consider the following areas: The total time taken for completing your request for equity finance can take a number of months, so it is definitely not suited for a short term cash injection and is not suited for business that are in trouble or that have short term cash flow deficiencies.
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