Sources of Equity Financing

• Personal savings / Personal funds – This is the least expensive form of acquiring business funds because it will not require the owner to pay anyone back. It can include profit sharing,

  early retirement funds, or cash value insurance policies.
• Friends and relatives – Business owners can also request funding from family or friends. Because of their relationship with the owner, they are more likely to invest in the business. Often, they are more patient about being paid back than other business sources.
• Venture Capital – This refers to financing that comes from companies or individuals in the business of investing in young, privately-held companies. They provide capital to young

  companies in exchange for an ownership share of the business. These firms usually do not invest in a company unless it has a proven track record. They also prefer firms with a competitive

  advantage and/or a proven demand for the product.
• Angel investors – These are individuals and businesses interested in helping small businesses survive and grow. In many cases, angel investors help businesses for more than profit reasons

  – for example, they have a personal interest or experience in a particular industry. They may

  also be interested in the economic development of a specific geographic area.
• Government grants – Local and national government institutions often offer financial assistance in the form of grants and/or tax credits for start-up or expanding businesses.
• Equity offerings – In this situation, the business sells stocks directly to the public. Depending on the type of shares, equity offerings can raise significant funds for the company.