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Private Equity Financing: 3 Things You Need to Know

Both public and private businesses can take advantage of equity financing. If your business is traded on the stock market, you can raise capital through the issuance of new shares — a process knowing a share offering or simply an offering. Even if your business isn’t traded on the stock market, though, you can still take advantage of equity financing. Private equity financing specifically involves the sale of equity in privately traded businesses to investors.

Private Equity Financing: 3 Things You Need to Know

#1) Private Equity vs Venture Capital Financing

Private equity financing isn’t the same as venture capital financing. While they both involve the sale of equity to investors, they focus on different types of businesses. Private equity financing focuses on privately traded businesses. Businesses that aren’t traded on the stock market can raise capital by selling stock shares to investors.

Venture capital financing, on the other hand, focuses on early stage businesses with high growth potential. Most of these businesses are privately traded as well, but some of them may be publically traded. Regardless, venture capital financing specifically focuses on early stage businesses with high growth potential.

#2) Carve-Outs Explained

Carve-outs are common with private equity financing. Also known as an equity carve-out, it involves the sale of a division. If your business has multiple divisions, you can raise capital for it by selling one of those divisions to investors. A carve-out will allow you to free up resources while raising capital in the process.

#3) Advantages of Private Equity Financing

There are several reasons to consider private equity financing. As a form of equity financing, it won’t increase your business’s debt. You can raise capital for your business by selling stock shares to investors — all without taking on new debt.

You don’t need to perform an Initial Public Offering (IPO) to raise capital with private equity financing. On the contrary, private equity financing specifically focuses on privately traded businesses. This makes it an attractive financing vehicle.

Private equity investors often bring more to the table than capital; they can provide expertise, connections and other resources that fuel your business’s success. After all, private equity investors want you to succeed. If your business becomes profitable and experiences strong growth, the investors’ stock shares will become more valuable. As a result, many private equity investors will provide more than just capital.

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 • October 7, 2022

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