When seeking money for a business, an entreprenuer should consider the company's debt-to-equity ratio. That is, the relation between dollars borrowed and dollars invested in the business. The more money owners have invested in their business, the easier it is to attract financing.
New or small businesses may find it difficult to get debt financing so they turn to equity funding. Equity financing often comes from non-professional investors such as family, friends, or employees. It can also come from professional investors known as venture capitalists.
Equity financing, or equity funding, is trading a percentage of a business for a specific amount of money. This form of financing enables a business to receive the capital needed without taking on additional debt. Outside investors will want to see an owner also investing their own money to show they are willing to share the risks. While it is possible to attract investors, the main source of equity financing is still family and friends.
