The pandemic has had a devasting effect on many businesses and sectors. And while it looks like we may be starting to turn a corner, many businesses are still not back to where they were pre-COVID. As we look for solutions to help companies still in the recovery phase, we cannot ignore the importance of equity investment.

Many businesses post-pandemic have found that they will need to rely on innovation to survive and thrive. For this, they will need capital. Taking on minority partners and equity financing is one way to ensure that these businesses can continue to innovate and scale and build back even better.

Why equity investment?

While there are many ways that a company may raise capital, equity financing has some unique advantages that many entrepreneurs will find appealing.

For starters, there is no loan to pay back. Many business owners during the pandemic were forced to take out loans to stay afloat, and a large percentage of these individuals are likely still carrying some or most of that debt. By turning to equity investment, entrepreneurs do not have to add to any debt burden they may already be carrying.

Since equity investment is not a loan, business owners do not have to worry about the added expense of a monthly debt repayment. This helps to ensure that they have more liquidity for innovation, hiring new talent, and daily expenditures.

Additionally, entrepreneurs receiving equity financing do not have to be concerned with taking out yet another loan that could impact their creditworthiness.

Of course, one of the biggest advantages of raising capital through equity investment is that – if they take on the right partner – they will benefit from the expertise and knowledge base of that partner.

Are there any reasons a business owner might want to avoid equity investment?

While equity investment will prove incredibly beneficial to many business owners as they work to help their business recover post-pandemic, there are some aspects of it that may deter some entrepreneurs.

Most notably, raising capital through equity investment means selling a share of your business and bringing in a partner. This means that you will be sharing your company profits and giving up full control over your company with that new partner. Some equity partners require more control, and others, require less.

Therefore, business owners considering getting equity financing need to carefully consider who they are willing to accept an investment from, and partner with on the next stage of growth.

Contact CBGF today

If you are exploring equity investment for your company and don’t want to give up control, we would like to speak to you and see if our firm might be a good fit. Contact us today to speak to a member of our team.