One of the most commonly misunderstood sources of financing for small business enterprises is equity capital. Equity is funding contributed to the business by its founders and other parties in exchange for an ownership interest, usually without a maturity, rate of return, or legal requirement of redemption. Starting any business requires capital and the more the better.

Cash contributed to the business by its owner is frequently called seed money. These funds are most at risk because they are used to organize everything from scratch, launching the enterprise prerevenue and preprofit. But like any seeds, their success may depend on later fertilizing and watering. Growth often brings on the need for additional funds to expand. ...

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