Equity Loan

Equity loan

Is typically an "investment" in a company that is secured by a certain amount of that company’s shares and structured, in part or whole, as a loan. Investment banks will provide funds secured by the "equity" or ownership shares of your company.

Companies that receive funding are those in large rapidly growing markets, or in niche markets which are not targeted by major players.

Investment Stage

Early and later stage companies with a founder and partial management team with revenue or profits and the need for expansion capital.

Size of the Investment

Typically $1-2 million initially with up to $5-10 million over the life of the investment.

Duration

Investments typically are for 3-5 years, but sometimes may last longer.

Equity Investments for Large Markets

An equity investment is defined as the purchasing of one or more shares in the ownerships of a business by an investor. These investors are then entitled to shares of the company’s assets in the case of liquidation. These shares of stock may be bought and sold among stockholders.

Equity investments are for companies with:

◦More than $25 million in gross revenue potential
◦Large National or International market potential
◦Management teams with successful track records


Capital Type Capital Type Definition

Equity Loan - Offer of an ownership position to induce the loan or can be a note that has an option to convert from debt to equity.

First Round Funding - Typically funding that accomodates growth. Company may have finished R&D. Funding is often in the form of a convertible bond.

Second Round Funding - Maturing company where a future leveraged buyout, merger or acquisition and/or initial public offering is a viable option.

Later Stage Funding - Mature company where funds are needed to support major expansion or new product development. Company is profitable or breaks even. Merger and Acquisition Funding - The combination of two companies. If one company survives, it is a merger. If both survive, it is an acquisition.

Mezzanine Funding - Company’s progress makes positioning for an Initial Public Offering viable. Venture funds are used to support the IPO.

Seed Funding - Earliest stage of business, typically no operating history. Investment is based on a business plan, the management group backgrounds along with the market and financial projections.