Help & How-To

Finance & Accounting
What are the pros and cons of equity financing?
What are the pros and cons of equity financing?

Asked by cleogrl07
Posted: Friday, August 10, 2007  |  Found in Finance & Accounting


More answers by Rosalind Resnick
The advantage to raising capital through equity (as opposed to debt) financing is that, if your business goes under, you don't have to pay the money back. Therefore, you can swing for the fences knowing that, even if you strike out, you can still get back in the game. The disadvantage to equity financing is that you're selling shares of your company -- often at a very low price -- to an investor who now owns a piece of your business and has some control over the way your run your operation. Assuming that your business becomes the next Microsoft or Google, selling equity could prove to be a very expensive way to raise capital. 
Rosalind Resnick is the founder and CEO of Axxess Business Consulting, a New York consulting firm that advises startups and small businesses.


Recent Articles & Resources
Insight from Business Experts
Venture Capital: Hurt By The Credit Crisis?
Recently, there has been some discussion about whether the credit crisis is helping or hurting venture capitalists. The argument that it is helping holds that the credit crisis has made returns from venture capital investments more favorable than returns from other types of private equity. The high returns to private equity ...

For Small Businesses, We Ride it Out
For many small businesses -- mine included -- the effects of the credit crisis playing out around us day by day, hour by hour, have not changed what we do. Many of us have felt no impact -- at least not so far. Oh, sure, we might have started to feel ...

Why The Fall of Wall Street is Good!?
Great news! The lure of Wall Street and disproportionately paid finance executives is finally behind us. The current debacle presents an amazing opportunity to liberate America’s top talent from the great opportunity cost of being brave and starting something new. For the first time in decades, the most talented people ...

What You Can Learn From Hollywood
Scott Kirsner spent the last three years immersed in the movie industry in order to write a book called Inventing the Movies: Hollywood's Epic Battle Between Innovation and the Status Quo, from Thomas Edison to Steve Jobs. He talked with directors like Francis Ford Coppola and James Cameron, editors, cinematographers, ...
Have a burning question? Ask now!