Equity financing often comes from angel investors, the business owner’s private funds, family and friends, or stock sold to shareholders.
If your business has a high debt-to-equity ratio, experts suggest considering increasing your owner equity before looking for equity financing. The more you have personally invested into the business the more likely you are to find equity financing.
Equity financing can come from family, friends, or other individuals, but the majority of equity financing for small businesses comes from venture capitalists. Because venture capitalists are investing for profit, they can often be very vocal about your business practices, strategies, and performance.
Venture capitalists tend to favor established businesses that have been in operation for at least several years and are, or have the potential to become, regional or national businesses. They typically invest $250,000 or more and expect a high rate of return.
According to Creative Investment Research, an independent investment and research company, less than 4% of all venture capital is awarded to women business owners.
