Definition:
Financing a small business with equity means selling part of the company, or issuing shares of stock, to other people, usually known as investors. The small business receives money to finance its operations in return. The investors expect to receive a return on their investment in return.
After equity is sold in the company, the business owner no longer owns 100% of the company. Investors own shares of stock and also own some percentage of the company.
Also Known As: equity capital
Examples:
John's software company expected to grow 25% in the coming year, but to do so he needed equity financing to help finance the growth.
