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Equity finance

Equity finance

Equity finance involves selling part of your business (‘shares’) to an investor. The investor in turn will take a share of any profits or losses that the company makes.

Advantages

Advantages of equity finance include:

  • investors can bring new skills and opportunities to the business, e.g. marketing or how to export overseas
  • you won’t have to pay any interest, or repay a loan
  • you share the risks of the business with your investors

Disadvantages

Disadvantages of investment finance include:

  • it can be a demanding, expensive and time-consuming process
  • you’ll own a smaller share of your business (although your share could eventually be worth more money if your business succeeds)
  • you may have to consult your investors before making certain management decisions
  • only limited companies can sell shares, so you can’t raise money in this way if you’re a sole trader or in a partnership

Need more information? Please visit the investment finance page on www.gov.uk