Equity Financing

When a company issues stock (or equity) to raise capital, it is known as equity financing. It can be issued to private institutions (such as venture capital funds, private equity funds etc) or to the public via an IPO (Initial Public Offering). Other than equity financing, a company can also raise money via debt financing (loans via banks or bonds). However, debt financing requires the company to regularly pay interest and obey certain convenants, which is why some companies opt for equity financing, as the cost of equity is only theoretical.

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