Private Equity vs Public Equity Explored
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What Is Public Equity?
How Does Public Equity Work?
Pros and Cons of Public Equity
Opportunity to raise funds quickly. Going public allows you to reach a large number of investors all at once. Raises your company’s profile. Issuing shares of your company helps generate publicity for your business, which can lead to other business opportunities. There is also prestige that comes with being listed on a major stock exchange. Can help you attract talent. An IPO can help your business attract new hires by offering perks like stock options.
The process is complex and time-consuming. An IPO can take anywhere from six to nine months, or longer. This can divert your attention away from other areas of the business and, as a result, the business could suffer. It can be costly. An IPO comes with a lot of expenses, including financial service and underwriting fees, as well as filing fees. Once your company goes public, it will be subject to additional reporting and disclosure requirements, which also cost money. You’ll have to answer to shareholders. Shareholders that own voting stock can play a role in shaping the company’s board of directors and deciding on special issues. Also, the pressure to perform well for shareholders can sometimes cause managers to sacrifice long-term growth for short-term profits.
What Is Private Equity?
How Does Private Equity Work?
Pros and Cons of Private Equity
Provides a large infusion of capital. Raising money for a company isn’t easy, especially if a company is just starting or experiencing financial difficulty. Private equity firms can provide the capital necessary to support a new or struggling business. Avoids potentially high interest rates. If a company is new or struggling, it may be difficult to qualify for small business loans with attractive rates and terms. With private equity investments, a company can avoid conventional financing methods. Can expedite growth. Private equity firms often bring both capital and operational expertise, a combination that can bring a company to the next level faster than they could do on their own.
It can be a long process. It can take a while for a company to get on the radar of a private equity firm. You’ll need to convince investors why they should put their money into your business, leading to months of negotiations that may not ever materialize. Dilutes your ownership stake. With private equity, you typically have to give up a substantial share of the business. In many cases, private equity firms demand a majority stake (more than 50 percent), which could leave you with only a minority interest. You’ll have less control over your business. The private equity firm will likely want to be actively involved, which can be helpful. However, it also means you’ll have less influence over the day-to-day decisions and future direction of your company.
Private Equity vs Public Equity
Similarities Between Private vs Public Equity
Differences Between Private vs Public Equity
Small Business Loan Tips
Generally, it can be easier for entrepreneurs starting out to qualify for a loan from an online lender than from a traditional lender. Lantern by SoFi’s single application makes it easy to find and compare small business loan offers from multiple lenders. If you are launching a new business or your business is young, lenders will consider your personal credit score. Eventually, though, you’ll want to establish your business credit. SBA loans are guaranteed by the U.S. Small Business Administration and typically offer favorable terms. They can also have more complicated applications and requirements than non-SBA business loans.
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