Equity financing is known as the process of raising capital through sale of shares whether online or offline.
You may know of companies that raise money because they have a need to pay bills or they could just need funds for long-term project meant to promote growth.
Once the company starts selling shares, the firm sells off ownership in return for cash. Sometimes, in this way, the firm could change hands when it comes to ownership.
Two major ways in which equity financing takes place is when friends and family members of the company owner provide needed capital. At other times, an initial public offering otherwise known as IPO may provide the needed capital.
Equity financing can refer to the financing of public companies listed on a stock exchange, and it could also refer to private company financing.
Things you should know about equity financing
- It is used by companies when they need cash.
- It is used to make a small company grow big.
- The two methods of equity financings are: private placement of stock, and public stock offerings.
- Equity financing is different from debt financing.
- National and local governments monitor the use of equity financing to ensure the methods are according to the rules governing such.
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