2. Tax Shields Compared to debt, equity investments offer no tax shield. Dividends distributed to shareholders are not tax-deductible expenses, but interest payments are tax-deductible. It adds to the cost of... Read More
Author: Factsheet 3
Many venture capitalists demand an equity stake of 30%-50%, particularly in cases where the company lacks a strong financial background. Most company founders and owners are reluctant to dilute that... Read More
Disadvantages of Equity Financing 1. Dilution of ownership and operational control The main disadvantage to equity financing is that company owners must give up a portion of their ownership and dilute their... Read More
Their successful backgrounds enable them to provide priceless help in the form of business contacts, management experience, and access to other sources of capital. Many angel investors or venture capitalists... Read More
2. Access to business contacts, management expertise, and other sources of capital Company management receives some benefits from equity financing too. Some investors are interested in the working of the business... Read More
In this case, equity financing is perceived to be less risky compared to debt financing since the company will not have to repay its shareholders. Investors usually look at the long... Read More
Advantages of Equity Financing 1: Alternative source of funding The primary benefit of equity financing is that it provides a source of alternative funding to debt for companies. Small start-ups that... Read More
5. Initial public offerings (IPOs) Companies that are quite well-established can raise finance with an initial public offering, or IPO. IPO is a method of raising finance where companies allow its... Read More
3. Venture capital firms These are firms that make investments in businesses they believe will grow fast and appear on stock exchanges later. They invest a larger sum of money into... Read More
2. Crowdfunding platforms Crowdfunding platforms allow many people in the public to invest in the company in small amounts. Members of the public decide to invest in the companies because they... Read More