Legal Definitions - equity financing

Definition: Equity financing is the process of raising funds by issuing capital securities (shares in the business) instead of taking loans or selling bonds. The capital raised through equity financing is called equity.

Examples:

• A startup company raises money by selling shares to investors.
• A publicly traded company issues new shares to raise money for expansion.

These examples illustrate equity financing because the companies are raising funds by selling ownership in the business to investors instead of borrowing money from a bank or issuing bonds. The investors become shareholders and have a stake in the company's success.