Equity Financing is a method of raising capital by selling shares of a company to investors in exchange for ownership stake.
How It Works:
- A business offers shares to investors.
- Investors provide capital in exchange for ownership.
- Funds are used for business growth or operations.
- Investors may receive returns through dividends or value appreciation.
Benefits:
- No repayment obligation like loans
- Reduces financial burden on the business
- Attracts strategic investors and expertise
- Supports long term growth
Example:
A startup raises ₹1 crore by selling shares to investors, who become partial owners of the company.