Lines of Credit A pre-approved loan where collateral has been given and the business owner draws against this amount with individual notes. These notes are for the specific amounts needed at various times. Equity Financing Equity financing dilutes ownership in the business. The equity funds remain in the business and increase the net worth for the owners. This type of money is not repaid.
Ownership is spread among others and the capital is invested for an indefinite period of time.
The business has no legal obligation of the repayment of the amount invested or of payment of interest for the use of the funds. Equity investors share in the ownership of the business and are entitled to participate in any distributions of earnings. Such investors are usually willing to wait longer for profits. Their returns are the dividends and the expected appreciation of the stock. Equity investors assume risk and have no specific claim against assets of the business.