During the process of business management and expansion, the company periodically needs additional financial resources. In such cases, the most relevant way is debt financing or equity financing. Each source has its advantages and is very important for future growth.
Equity financing is very common and often used as a method for start-up businesses. It is a way to raise capital by selling company stock to investors, also additional shares can be issued. This also means that investors get ownership of this company. They take part in decision making and part of management. The ownership can be given to friends and family for small businesses or to the public through an initial public offering (IPOs) for large-cap firms, leaders in their industry. Grown-up and diversified management structure can have its pluses, as the investors have participated in the financial aids; they are interested to grow up business.
Many startups used the method of equity financing and many of them were quite successful.
There are several main types of Equity Financing: