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Equity Financing vs. Debt Financing - Everything You Need To Know

If a business seeks to raise capital for its needs, it typically has two financing options: equity and debt. Debt financing involves borrowing money, whereas equity financing involves selling a portion of the company’s equity.   What Is Equity Financing? Equity financing involves raising capital through the sale of company shares. When a company sells shares, it effectively sells ownership in its company in exchange for cash. Companies may raise money to meet a short-term need, such as paying bills or fulfilling a long-term goal, like investing in future growth.   How does Equity Financing work? The equity financing process involves the sale of a company’s stock in exchange for cash. The proportion to be sold will depend on your company’s investment and the value of your business at the time of financing. With the growth of your business, the value of the investor’s stake will also increase. There are multiple ways for businesses to obtain equity financing, including business angels, c