Selling shares of ownership in your business is one way to raise money. Relative to taking on debt, equity financing can be cheap and low-risk, since you don't have to pay money back to a lender. However, to raise money by selling stock, you usually go to venture capital firms or private investors, and you're giving away a slice of your business. Ideally, you will avoid selling shares unless the potential to gain from the financing is extraordinary. Advantage No New Debt A major advantage of selling partial ownership is you don't have to take on new debt. Loan financing comes with repayment requirements and an interest rate that leads to finance charges until the loan is repaid. In some cases, you could pay on the loan for years, which means you not only repay what you borrowed, but hundreds or thousands of dollars in fees on top of that. Companies that take on too much debt leverage could eventually face business failure, or even bankruptcy. Advantage Shared Risk Another advantage of selling stock to raise funds is that if your business fails, you do not have to pay the money back to investors. You could potentially get sued if you were negligent in your use of the money. However, new investors take on the same risk of loss that you do when you invest in your own business. If you want to minimize your own potential for loss on a new investment, equity financing is the way to go. Disadvantage Loss of Ownership A major disadvantage of selling shares of stock to raise funds is that you also give up some level of ownership. Investors buy into your company hoping to profit if the company succeeds and generates profits down the road. Some small business owners seek equity financing without fully contemplating the realities of a new ownership structure. Giving up too much of your company early on to get investments can become frustrating when your profit from your idea and hard work is diminished. Some venture capitalists ask for participating preferred stock. Preferred stock takes precedence over common stock shares owned by founders, which means preferred shares are paid first on a sale of the company. You usually receive less return in this case. Disadvantage Loss of Control Along with the loss of ownership, you also relinquish some control over your business through equity financing. Some investors insist on having a representative work for the business or become part of your higher the ownership stake, the more control over the direction and decisions of the company the investor usually wants. Spreading out your stock sales to a few investors in limiting shares as much as possible can help reduce your loss of decision-making power over your company.

kelebihan dan kekurangan sale stock