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Epica FAQ Series

What does equity fundraising mean, and what are its pros & cons?

Funding

What does equity fundraising mean, and what are its pros & cons?

Equity Funding

If someone invests money in you and your company because he sees value and potential in your idea and proposition, then that is equity funding.

The pro and cons are below:

PROS:

What you pay to your investors in forms of dividends and shares is comparatively less compared to interest on bank loans.

You are not obliged to pay the investors if there are no profits.

Investors bear the investment risks in case the company fails.

CONS:

If your company is making a huge amount of profits, you would have to pay them a previously agreed percentage amount of your profit.

The investors have a say in decision making.

If your company is earning a huge amount of profit, then the payment you’re making to the investors in terms of dividends will be valued much more than the interest of a bank loan.

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