On layman's term, private equity financing is simply the funding of business expansion or a business opportunity using the money of an investor or group of investors. The investors will be tagged as "stock holders" and will gain profit depending on the business turn out. The investors are involved on the actual management and decisions of the company.
Individuals or a group who wants to become investors are qualified as long as they are capable of providing financial support that the company needed in exchange for a stock or a company share. On the other hand, investors are facing risk when investing money, that's why company evaluation and market study are needed before engaging on the process.
For us not to be more aware of what really private equity is all about, maybe it is a good idea to know the advantages and disadvantages of the process before diving in to the deep.
Advantages of private equity financing
1. Flexibility - Investors have a choice to choose the nature and structure of business in which they are going to invest their money. There is no restriction as long as their ability to provide funding is there.
2. Established Connections - Being with the groups of other investors simply give you a chance to expand your network connections. It's a great chance to get along and have additional contacts for other ventures you are planning in the future.
3. Boost Your Experience - Gain new knowledge through experience on the nature of some businesses when entering different kinds of ventures
4. No "Only-me-gets-the-whole-pizza" type of earnings - The income of the company is distributed on the investors and the owner depending on the deals happened that was written on the contract.
5. Getting good Reputation - Being an investor is a good way to get a good reputation. No wonder why the Investors are well respected wherever they will go.
Disadvantages of Private Equity Financing
1. The Need for Money - An Investor cannot be an investor when he doesn't have money to invest. In additions, big companies are always demanding for great investments that's why ordinary people cannot simply invest on it.
2. Demands for Investment Return - Sometimes, some investors demands a high financial return most especially if the Business may face a High Risk.
3. No Autonomous Decisions - The Decisions cannot come from a single Individual instead by the group of investors and the Owner. The Decision can be done sometimes through voting.
Sometimes some companies, especially those starting ones with limited financial resources, open its doors for private equity financing. This will gain additional financial support on their business and will support the investment opportunities all the way to the top. For instance UK private equity companies which are dedicated in helping those people who have a great dream to succeed.
Individuals or a group who wants to become investors are qualified as long as they are capable of providing financial support that the company needed in exchange for a stock or a company share. On the other hand, investors are facing risk when investing money, that's why company evaluation and market study are needed before engaging on the process.
For us not to be more aware of what really private equity is all about, maybe it is a good idea to know the advantages and disadvantages of the process before diving in to the deep.
Advantages of private equity financing
1. Flexibility - Investors have a choice to choose the nature and structure of business in which they are going to invest their money. There is no restriction as long as their ability to provide funding is there.
2. Established Connections - Being with the groups of other investors simply give you a chance to expand your network connections. It's a great chance to get along and have additional contacts for other ventures you are planning in the future.
3. Boost Your Experience - Gain new knowledge through experience on the nature of some businesses when entering different kinds of ventures
4. No "Only-me-gets-the-whole-pizza" type of earnings - The income of the company is distributed on the investors and the owner depending on the deals happened that was written on the contract.
5. Getting good Reputation - Being an investor is a good way to get a good reputation. No wonder why the Investors are well respected wherever they will go.
Disadvantages of Private Equity Financing
1. The Need for Money - An Investor cannot be an investor when he doesn't have money to invest. In additions, big companies are always demanding for great investments that's why ordinary people cannot simply invest on it.
2. Demands for Investment Return - Sometimes, some investors demands a high financial return most especially if the Business may face a High Risk.
3. No Autonomous Decisions - The Decisions cannot come from a single Individual instead by the group of investors and the Owner. The Decision can be done sometimes through voting.
Sometimes some companies, especially those starting ones with limited financial resources, open its doors for private equity financing. This will gain additional financial support on their business and will support the investment opportunities all the way to the top. For instance UK private equity companies which are dedicated in helping those people who have a great dream to succeed.
No comments:
Post a Comment