The alternatives to equity finance are basically the financing options that are used by businesses in order to generate money for the purposes of running the operations. There are several useful alternatives to equity finance like loans and overdrafts for example.
On Alternatives to Equity Finance
The alternatives to equity finance are the substitutes that are used by business establishments instead of equity financing, which is the most widely used option as far as generation of business capital is concerned. There are several options that a company might consider in place of equity finance.
The loans are very viable alternatives to equity finance. Among the loans that are provided to business enterprises are the commercial mortgages, which are secured against the business properties. The business enterprises can also opt for borrowing money for small periods of time. Mostly the time period of such loans are within three to five years.
The overdrafts are useful alternatives to equity finance as they provide a lot of flexibility to the borrowers. However, they can only be availed for a short term period as they have to be paid back on demand.
Loans from Family and Friends
The business establishments at times go for loans from family and friends as an alternative to equity finance. However, it has been seen that this option is primarily used by the members of the small business fraternity.
Additional funds serve as valuable alternatives to equity finance. The additional funds are mainly taken by the partners in businesses or the directors of business establishments from other partners or directors.
The business houses can also look to expand their businesses or just get it started with the help of government support. Government support is a convenient alternative to equity finance.
The joint ventures are very popular alternatives to equity finance. There are many types of joint ventures that are excellent alternatives to equity finance. As per definition, joint ventures are the combined undertaking of two or more entrepreneurs for purposes of business.
The credit cards can also be good alternatives to equity finance as they are extremely time efficient. They are extremely flexible as well. However, the credit cards cannot be used for the purpose of borrowing for a longer period of time.