What is equity financing?
Normally, when people think of financing, they think of incurring debt, like by taking out a loan. But for businesses, there's another option: equity financing. In equity financing, rather than borrowing money, a business sells part of itself to an investor or many investors. This is a way for it to raise capital without being obligated to make a payment it may not be able to guarantee during a growth phase or start-up period.
While selling shares to the public is a common way to do equity financing, companies can also take advantage of angel investors, crowdfunding platforms, venture capital funding rounds, and corporate investors, who may have a related business that has a significant interest in the product the company seeking funding is producing.