engage magazine issue 007/\'08 - Page 68

68 FINANCE Equity What is equity and how can it be Many business owners don’t realise that they have equity trapped in their business that could be realised in the form of cash that could be ploughed back into the business to boost its growth. give a reliable assessment of the viability of a company for equity finance. The world of equity finance has been glamorised by the BBC programme “Dragons Den”. If you’ve seen an episode, then you’ve seen an example of equity finance in practice. Take a look at the panel, you are looking at a panel of potential business angels. Business angels are wealthy individuals who have high personal net worth and enjoy investing in high growth businesses in return for an equity share. Investment might be by a single business angel investing on their own, or as part of a group, network, syndicate or investment club. With a business angel you are likely to get more than just financial assistance, often they make their wide range of skills, experience and contacts available to the company they invest in. Some of the key benefits of using business angels are that they often make an investment decision quickly, without financed, asks Chatsworth Consultancy too much red tape. Seeking the help of your professional advisers is important here. Your accountants and legal experts will be crucial to enable an equitable outcome. Nevertheless, you will still need to draw up a professional and tailored business plan. Most business angels can bring valuable first-hand experience of either working in small and medium sized enterprises (SMEs) or running their own business venture. They are also likely to have local and or specific knowledge, as they tend to focus their investments within a small geographical area and within business sectors they are experienced with. Some business angels may be eligible to have their investment funds matched by the government under its Enterprise Capital Funds (ECFs) scheme. Finding the right equity investment route for your business is your first challenge. If it turns out that a business angel is what you need then there are different n real estate, equity is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). In the context of a business the concept of equity is difficult to nail down, mainly because the definition of a business can be so varied. But in general terms the equity in your business will be related to its perceived worth which could be transferred to stocks or shares in the company. So if you took a look at your trading figures, your overheads and any current financing arrangements you would start to get a picture of the equity value of your business. In order to get a reliable value of the equity available to you for equity financing the quick answer is ask your accountant or other professional adviser. They are best placed to I engage | uk ISSUE SEVEN 2008