Equity - Private Equity

Acquiring equity through selling part ownership of the company to private investors by invitation.

Private companies have a limited number of potential shareholders (max 50). 

Existing owners have control over the conditions of the sale of equity and to whom it is sold.

Think of 'Shark Tank' as a perfect example of the acquisition of external equity through bringing on a new owner (one of the Sharks!).

This type of external funding can be time consuming to acquire and hard to obtain at the rate the current owners desire. Remember in Shark Tank, the Sharks usually negotiate for more ownership of the company for less money.

Private Equity investors might be hard to find - business networks through accountants, or local business organisations might be a pathway to finding that perfect partner required to finance whatever project the business wants to undertake.

Can be used to improve liquidity (cash injection) and solvency (stablise the gearing ratio by using relatively less debt to equity).