PerfectBusiness.com - Powerful Business Planning Software , Find Startup Funding.

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Contributing Authors

	Joe Kennedy Author of The Small Business Owner's Manual
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	Tom Severance Author of Business Start-Up Guide
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	Steven D. Strauss Author of The Small Business Bible
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	Stephanie Chandler Author of The Business Startup Checklist & Planning Guide
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Equity Financing

Going into debt, or debt financing, is one way to fund expansion. The

other is called equity financing. Many growth-stage small businesses

use equity financing to fund expansion plans. As its name implies, eq-

uity financing occurs when you sell part of the business in exchange for

capital. The deal can take many forms, from the sale of shares in a corporation

to adding a partner to adding members to your LLC. As in the

startup stage, equity financing often comes from nonprofessional investors

such as family members, friends, business associates, or industry

colleagues.

The other form of equity funding comes from professional investors

known as venture capitalists (VCs) and angel investors. VCs

are typically groups of wealthy individuals or financial institutions

and most specialize in a few industries that the members know well.

In the Silicon Valley for example, the lion’s share of VCs are former

computer executives who want to invest in new high-tech startups.

Angels are individuals who want to invest in growth-opportunity

businesses.

VCs, while certainly on the lookout for the Next Big Thing, more

often look to invest in companies that are three-to-five-years old that

have a solid plan and sound management team in place able to execute

that plan. VCs will look at and listen to hundreds of pitches and plans

before investing in the cream of the crop.