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Unlike debt financing, the decision for a business or a bank to choose equity financing is a difficult one. It does not involve just borrowing money and repaying the principal with interest. It is actually selling the ownership interest in the business to people who are interested in the company. Equity financing also requires a willingness to share management control with the investors. Any major decisions that will affect the future of the company will need to be approved by a majority vote at a meeting of the stockholders. Any repercussions following these decisions will be the responsibility of the Board of Directors. In some countries, the Board can be personally and in extreme cases financially accountable for any negligence. |
