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5 Things You Need to Know About Private Equity

An Initial Public Offering (IPO) isn’t the only way you can raise capital for your business. Even if your business isn’t publicly traded — and you have no plans of making it publicly traded — you can use private equity to finance it. Private equity specifically involves investments in private businesses, hence its name. When seeking private equity, though, there are several things you need to know.

5 Things You Need to Know About Private Equity

#1) Sale of Ownership

Private equity is considered a form of equity financing. In other words, it requires you to sell some or all of your business to an investment organization. Known as a private equity firm, these investment organizations will essentially buy an ownership stake in your business.

#2) Different Forms

While all instances of private equity involve a private equity firm purchasing an ownership stake in a non-publically traded business, there are different types of private equity. Venture capital, for example, is a common type of private equity. It involves a private equity firm targeting a startup. With venture capital, private equity firms specifically seek to invest in early-stage businesses with high growth potential. Other types of private equity may target stable and more established businesses.

#3) Often Seek a Majority Stake

Private equity firms will often seek a majority stake in the business in which they invest.  A majority stake is defined as 50% or higher ownership. Purchasing a majority stake allows private equity firms to make decisions regarding the business’s operations.

#4) Bypasses Requirements for Public Trading

With private equity, you can bypass the requirements for public trading. The U.S. Securities and Exchange Commission (SEC) has certain requirements for publically traded business. Among these requirements is releasing quarterly earnings reports. Only publically traded businesses, however, must comply with these requirements. By financing your business with private equity, you can keep it privately traded so that you don’t have to worry about quarterly earnings reports and other requirements.

#5) Attractive Form of Alternative Financing

Private equity is an attractive form of alternative financing. Your business won’t incur debt with private equity. As previously mentioned, it’s considered a type of equity financing that’s characterized by the sale of ownership to an investment organization. You can raise capital for your business by selling an ownership stake in it to a private equity firm.

This article was brought to you by Intrepid Private Capital Group – A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.

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Intrepid Private Capital Group • June 17, 2021

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