How to Avoid Selling Equity in Your Company?

December 31st, 2018 | by James B
How to Avoid Selling Equity in Your Company?
Business
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Teaming up with someone in order to share responsibilities and get some operational/administrative help can be a good idea, provided that you can find the right person for the job. However, in a scenario where you’re just short on cash, it might be for the best to find other methods of financing your business, those that do not involve selling equity in your company.

Sure, it’s an easy way out, however, it’s a decision that you may come to regret later on, due to the fact that selling equity may mean selling control over your company. Moreover, the shares you sell will be worth so much more in the future, which means that what may seem like a good idea at the moment might end up being a horrible deal for you in the future. With that in mind, here are a few methods that can help you avoid selling equity in your company and making a deal that you might come to regret.

1.      Use your private funds

The first thing you should do if you want to own 100 percent of your business is to use private funds to do so. Some smaller e-commerce businesses can be started with as little as $2,000 to $5,000, which you shouldn’t have trouble raising. On the other hand, if you need $20,000 to $80,000 to start (as is often case with small businesses), you might be forced to sell an asset (a property, jewelry collection or a vehicle). Other than this, you can also dip into your savings account or get money from your 401K. Now, this latter part is definitely not advised, yet, desperate times sometimes call for desperate measures.

2.      Business loans

The next thing you need to look for are business loans. Unless you have a valuable asset to use as collateral, someone to vouch for you or a sterling credit history, you’ll have to go for unsecured loans. While they do pose a tad bigger risk for the lender (since they’re unsecured) there are more than a few advantages of unsecured business loans that you have to consider.

First, they’re easier to obtain and you can get approved in as little as 24 hours. Needless to say, the documentation is minimal. Second, some lenders are willing to issue you up to $300,000. Lastly, you get to return the money in about 24 months (sometimes even as much as 60), which is great, when compared to business world standards. Sure, you get to return the interest rate, but you also get to keep control over the company.

3.      Go for crowdfunding

If you’re starting a tech business or have the idea that would revolutionize the industry in question, you might want to try crowdfunding and see if the future customers would be interested in supporting you financially. Nowadays, there are so many crowdfunding platforms that you no longer have to go door to door for your fundraising. All you have to do is make a compelling argument and turn this into an immersive presentation.

4.      Grants

Lastly, if you fall under a certain demographic group that’s seen as underrepresented in the business world or aim to enter a certain industry, you might be eligible for a government grant. This alone can be a great angle for you to enter the business world, seeing as how this often comes with no strings attached. Well, at least not as much as you would expect.

Conclusion

At the very end, it’s important that we mention one thing – selling equity in your company might not be something that you’re able to avoid, even with all your efforts. The amount of money that you raise through one or all of these means simply might not be enough to cover all of your financial needs. In that scenario, all you can do is look for a way not to get cheated out of this deal. Some good ideas are redemptions, selling equity to the employees and finding outside investors (angel investors or private equity firms). All in all, where there’s will, there’s always a way.