Equity capital is money provided in exchange for ownership in the company. The equity investor receives a percentage of ownership that ideally appreciates in value as the company grows. The investor may also receive a portion of the company’s annual profits, called dividends, based on his ownership percentage. For example, a 10% dividend yield or payout on a company’s stock worth $200 per share means an annual dividend of $20.
Before deciding to pursue equity financing, the entrepreneur must know the positive and negative aspects of this capital.
• No personal guarantees are required.
• No collateral is required.
• No regular cash payments are required.
• There can be value-added investors.
• Equity investors ...