IMPACT OF MARKET CONDITIONS ON EQUITY FINANCING

Equity financing sells shares of a company to raise capital and create ownership rights for investors. There are many instruments falling under equity financing, such as common stock and preferred shares. For start-ups, it also comes in handy since it can be used to pay off initial costs. Investors reap their gains from the dividends or the higher share price. It may come from personal circles, professional investors, or an IPO. A major advantage is that there is no obligation to repay the amount since companies are not forced to spend a dollar they do not have, thus keeping them safe from the cash crunch related to repayment. However, on the flip side, there are disadvantages, such as a lack of control and profit-sharing with investors, thus business owners need to tread their position very carefully.