Financing a business isn’t easy, especially for small or emerging businesses, and the finance world can be a daunting place. Swoop is here to clear up the confusion and help you to raise the right type of business funding to fuel your company’s growth.

We’ll begin by giving you the lowdown on equity funding for business.

Put simply, it’s raising investment funds for your business by selling shares. This could range from raising a few thousand pounds through friends and family, to generating millions of pounds through investment from a corporate giant.

Loans for business don’t usually provide enough capital to get you where you want to be, so that’s where equity financing comes in. There are two possible sources of equity funding for business:

Investors – external investors supply capital either as start-up funding, or on an ongoing basis

Owners – the business founders supply their own business funding in exchange for equity.

Equity funding for a business is not the same as debt financing, which refers to funds borrowed by a business, paid back with interest over time.

Equity funding for business is popular, especially as start-up funding, because investments don’t generally have to be paid off with monthly payments. This improves cash flow, which is useful for other elements of your young business.

Securing equity funding for your business is great because relationships with your equity investors can last a long time. While you build your business, they can help you gain knowledge, experience and industry connections.

There are a few common sources of equity funding for startups and businesses.

Family and friends: Offering your friends or family a share in your business in exchange for equity is a great way to get startup funding.

Venture capitalists: These large corporations offer larger business funding investments to start-up businesses which have potential for high-growth and profits.

Growth funds: These schemes help young companies with start-up funding or small business funding. They include the following:

The Seed Enterprise Investment Scheme (SEIS) offers tax-efficient benefits to investors in return for investment funds for businesses in the UK, which are very young and considered high risk.

The Enterprise Investment Scheme (EIS) helps small companies raise equity funding for the business by offering tax relief to investors who buy shares in those companies.

A venture capital trust (VCT) is a tax-efficient, collective investment scheme designed to provide private equity funding for businesses. Investors receive income (dividend distributions) and/or capital gains through the success of these small, expanding companies.

Crowdfunding: This modern form of business funding involves a large number of people each contributing a small amount of money. Through the internet, businesses can talk to millions of potential funders by sharing their profile on social media to attract equity funding for their business.

Stock market: You can float your business on the stock market in an Initial Public Offering (IPO), publicly offering shares to raise equity funding for your business. This can be expensive and poor economic conditions can affect your ability to raise funds.

First comes the seed round, where the founders, friends, family, and ‘angel’ investors supply start-up funding for the company, in exchange for a stake. This equity funding for the business may be used for market research and early product development.

This is when external investors are offered the first round of shares, usually at the point when the product or concept is being finalized and optimized. This business funding is often used to pay for the salaries of the team.

As you gain traction with customers and establish your business model, you need to scale your business by growing your team and increasing your market share. At this point you need to attract investment funds for your business to take it to the next step.

When a company has proved its success in the market, it seeks business funding from venture capital firms. At this point the business will use this business finance to scale hard and fast, expand internationally, develop its products further or go through acquisitions.

And there you have it – your quick round-up on equity funding for financing a business. Simple! But don’t worry, Swoop is here to help.

Whatever your funding requirement is, and whatever stage you’re at, our team would be delighted to chat you through your options. Just drop us an email at hello@swoopfunding.com or register your business at here.

To get our funding journey started, or to discuss any of your funding needs, please drop us an email at hello@swoopfunding.com or visit us at swoopfunding.com

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