For some Ohio businesses, traditional financing options are not available or for some reason not that attractive. Perhaps an ongoing business wants to expand; however, they do not want to go through all of the banking red tape for a traditional business loan. Or, perhaps a new business venture is forming and traditional financing is not readily available. In some cases, the use of equity investors as a part of the business planning and financing process is the best option.
An equity investor actually purchases a portion of the business. As a partial owner, the equity investor expects a return on the investment, yet he or she also recognizes that as with any business venture, there is risk involved. The possibility that significant gains can be made is there, along with the possibility of a total loss of investment. Thus, the equity investor typically expects a significant portion of company profits or other such return for the risk involved.
An equity investor also maintains certain rights within the company he or she invests in. For example, he or she has voting rights in regard to the board of directors and all major business decisions. Furthermore, this investor expects to be kept informed of all major business decisions. However, in addition to needed business funding, this investor often brings significant experience, guidance and resources to the table.
Business planning decisions can be the most important decisions that an Ohio business will make. Decisions regarding who to do business with and how it should best be accomplished will have a dramatic impact upon the business. An experienced attorney can help the company decide if working with an equity investor is the right choice and the best way to structure the agreement.
Source: smallbusiness.findlaw.com, “Equity Investors & Your Business“, Accessed on April 24, 2017