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How much investor control should there be for your company?
However, getting the needed capital can prove difficult for some businesses just starting up. Not everyone has the money needed to fund a business, and loans for small businesses can be difficult to obtain. That is why for some businesses, equity financing is the way to go. With equity financing, the business owner gives up a portion of the control of the company to investors. In return, the investors provide the business with the needed capital to start and operate their business. Unlike traditional financing, such as a bank loan, the borrower does not have to repay the money given.
But this does not mean you're getting free money. Instead, you are relinquishing a portion of control of your own company. If those who are investing in your business don't like the way you are running your company, you stand the chance of losing control to them. On the flip side, you could keep full control if they agree with the business decisions you make. The money comes from either angel investors, private individuals who use their own money to fund businesses, or venture capitalists, firms that use other money to support and grow a business. How much investor control should there be for your company? Chances are, you started a business because you wanted independence and wanted to operate your own company exactly the way you wanted. Using equity financing could jeopardize this if you are not careful, as investors can come in and move your company in the direction they feel is best for making it profitable. However, this is not always a bad thing. Let's say you give control of your business to your investors, leaving you with 10% of a company that, under their control, has grown to over a million dollars. Depending on how you look at it, this could be better than owning all of a company worth $100,000, as the investors have a better chance of making it grow. How can you keep control of your business?
If feel that your company has potential for tremendous growth and you don't mind relinquishing some of the ownership, consider equity financing.
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