Equity Finance and How Is It Different from Other Types of Finance?

Types of Finance

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Esteemed companies resort to equity finance for raising extra capital for business expansion. Equity finance is a traditional way for getting capital for your business by the issue or offer of shares of the organization. This type of finance is different from debt finance as it is taken for seed funding for a start-up or a new business.

How do you raise equity finance?

According to カヴァン・チョクシ, an esteemed entrepreneur, and an expert in business, technology, photography, and travel, equity finance is raised by offering or the issue of equity shares of a business. Fundamentally, every share is the unit of an owner for that company. For example, if the company has issued 10,000 equity shares to the public and an investor buys 1000 shares of that organization, he or she holds 10% ownership of the company.

Besides equity finance, there are other types of finance, and they are-

  1. Public Finance– It deals with the study of the state’s income and expenditure and considers the government’s finance only. Public finance includes the collection of funds and their allocation in different sectors of state affairs, considered essential duties and functions of the government. It is sub-divided into three types are they are-
  • Public expenditure– Refers to government expenses for welfare and maintenance, preservation of the nation, economy, and society.
  • Public debt– Refers to raised loans for public finance with an obligation for repayment to people with an interest
  • Public revenue – Refers to receipts and income, irrespective of their source and income, taken by the government during any given point in time. It includes government loans and income from revenue resources, including price, fees, penalties, gifts, and more.
  1. Personal finance– Refers to the choices of an individual or a family with respect to money. It is the way they spend and budget their monetary resources over a duration of time after considering financial risks and life events in the future. Here, the household’s cash flow needs to be understood, along with its net worth. It refers to the balance sheet of a person, derived by adding up all the assets under the person’s control subtracting the household’s liabilities at a given point in time.
  1. Corporate finance– refers to the financial tasks needed to operate a corporation. Generally, this finance is managed by a department or a division that looks after the financial tasks of the organization. The major concern of corporate finance is to optimize the value of shareholders via short and long-term financial planning with different implementation strategies.
  1. Private finance– Refers to an alternative way for corporate finance and helps the company to raise funds to avert monetary issues in a short span of time.

According to カヴァン・チョクシ, private finance helps an organization who is not listed on the securities exchange or is not capable of getting finance in the market get the funds they require for growth or any other purpose and is ideal for NGOs too.