---
title: "What is equity funding?"  
description: "What is equity funding?"  
author: "nitya singh"  
published: 2018-02-27  
canonical: https://answers.mindstick.com/qa/35102/what-is-equity-funding  
category: "share market"  
tags: ["share market"]  
reading_time: 2 minutes  

---

# What is equity funding?

## Answers

### Answer by Shriyam Srivastava

**Equity [Funding](https://www.mindstick.com/articles/54959/3-funding-options-for-small-businesses)** refers to the issue of our shares in exchange of new [investment](https://www.mindstick.com/articles/157040/6-investments-to-make-to-improve-your-customer-service)/cash investment. It is usually done by selling shares/stocks of our company to the new [investors](https://www.mindstick.com/news/2413/with-collapse-of-ftx-genesis-alerts-investors-to-the-possibility-of-bankruptcy-without-new-funding) who wish to have a part of ownership in the company.

***One of the major reasons for doing equity funding are:***

- Lack of revenue or no revenue
- Desire to have exposure to expertise and professionals
- For selling a stake in the company with potentially higher costs to achieve quicker and greater growth.

![What is equity funding?](https://answers.mindstick.com/questionanswer/2e21b437-8689-4244-a5d2-fcc662c83198/images/a303911e-25dd-4ee0-94f3-d4978bbc72f6.jpeg)

## *How equity funding is done?*

The following are the [resources](https://www.mindstick.com/interview/1391/explain-how-to-retrieve-resources-using-resourcemanager-class) from where equity funding could be achieved :

- Friends or family
- [Corporate](https://www.mindstick.com/articles/54942/6-tips-for-organising-a-successful-corporate-event) funding
- Debt Funding
- Crowd funding
- [Government](https://www.mindstick.com/news/1911/upi-transaction-would-cost-zero-service-charges-clarifies-government) funds: The SIDBI in India provides the equity type assistance to entrepreneurs for setting up new [projects](https://www.mindstick.com/articles/105927/how-to-excel-at-managing-multiple-projects) through **national equity fund scheme.**
- Venture capitalists

***[Benefits](https://www.mindstick.com/articles/335648/what-are-serverless-architecture-benefits-and-best-practices) of equity funding:***

The equity funding helps the entrepreneur by providing investment for the [business](https://www.mindstick.com/articles/23272/why-software-localization-is-important-for-your-business), without worrying about repayment regularly.

The investors are benefitted once they decide to take high risks by [investing](https://www.mindstick.com/articles/198788/investing-in-the-right-tech-companies) in the new project/company, they get their profits in the form of dividends. They own a share of the company and when there are profits, they have a small ownership in the profit as well. Their money is paid back to them in the form of dividends.

For more information visit: http://answers.mindstick.com/qa/35114/what-is-cash-equity

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