Have you worked out how much capital you need for your business idea? Now you need to raise it.
Equity is the financial cornerstone of your business. It is composed of your personal wealth in the form of cash or saved money as well as objects such as machines or equipment you will use for your business. Even though equity is sometimes called own capital, the wealth of third parties can also be part of a company’s equity, for example if you borrow money from relatives.
As a rule, the more financial resources you own, the more independent you will be. Banks will use equity as a security. Ideally, equity should amount to at least 20 percent of the overall capital. Surveys have indicated that “insufficient securities” and “lack of equity” are the most important reasons for banks to turn down a credit application.
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