UNDERSTANDING EQUITY INVESTMENTS

. Nexxus Business Alliance is a more conventional in this sense of funding. At Nexxus Business Alliance, Mac and his thirteen partners are businessmen primary and lenders and investors second. None of them have won their dollars in the game of chance or are using inherited money when they invest in your company. They consider the the potential and viability of a finance request and then move forward. They establish their funding decisions on the power of the project and the history of those involved. Lets see what Mac has to say below.

There are a great number of people who don't comprehend equity investing, who are asking for equity investments for their finance request. Below I am going to outline how equity investment works, and what it costs the company where the equity investment is placed.

When an equity investor comes into a project with capital, he is actually buying into the business. The value of the business has to be established in the beginning so it is understood what portion of the business worth the equity investors equity investment equals. I will offer you an instance below.

An equity investor invests $1 million in the company, we have the business valued in the beginning after the monies are placed. It is determined that the project is worth $10 million at that point. That means the equity investor owns ten percent of the company. An equity investor is considered to be an owner, and when dividends are returned the equity investor gets 10% of the total amount of dividends that are paid out. Usually the board of directors determines how much is paid out in dividends in total. The equity investor gets his 10%.

The equity investor comes in for a certain amount of time. If his interests in the company are equivalent to 10% of the value of the business, at the time he is bought out of the company he gets that same percentage interest paid to him upon leaving. If the business that was worth $10 million in the beginning grew in value to be worth $50 million at that agreed-upon buyout time the equity investor would be paid 10% of the value of the company. That would mean his interest in the company of 10% based on his $1 million investment, would grow to be worth $5 million at the time he was to be taken out.

Most of our equity investors prefer the ten-year period. One more instance.
The equity investor brings in to a company $4 million at the request of the business owners. We evaluate the company, determining its value is $20 million. That means the equity investor has brought in an investment equivalent to 20% of the value of the company. In 10 years the investor has been paid his respectable dividends along the way, and now his arrangement is to be bought out of the company. We have the business appraised by an independent approved appraiser and he tells us the business is now valued at $60 million. That means the 20% investment value the equity investor placed in the beginning, being still 20%, a return would be $12 million. That is the true way equity investing plays out.

For myself I don't offer equity investments nor do I recommend them to any business owners, since you are selling a part of your company to someone merely because they have the funds. It is far better to go with a straight debt scenario and ask for an amortorium of principal and interest until postive cash flow.

If you have a commercial finance request, please feel free to visit our website and get in touch with in order to present your business plan. We look forward to hearing from you .