Drawbacks of equity financing

[Augusta]

The fact is a lot of good things come with it's bad sides. So it is with equity financing if you adopt it as your mode of financing your business then you should know about its bad sides. This will help you to take an informed decision

So what are the drawbacks of equity financing;

Percentage of ownership to investors

With equity financing you are selling the business stocks to investora. so this simply means that you are giving investors an ownership percentage of your company. So you need to be sure of this before going ahead.

Profit sharing

With equity financing you would have to share your profits with investors. As co-owners or of the business with you, you would have to share the profit of the business with them. So the profit of the business will be shared amongst investors.

Partial control of the business

With equity financing you are no longer the sole controller of the business. You need to consult with the investors before taking any decisions. This means that you'll give up some control over your company

Expensive to run

With a lot of people involved In running the business due to the type of financing involved It may be more expensive than borrowing