Equity finance
The number of private equity deals in Europe was up by 22% in 2024, with the UK venture capital market now making up over 5% of global investment, positioning Great Britain third largest in the VC world after China and the USA.
If these numbers have got you considering how your business can gain access to equity finance, read on. We’ve included helpful information like what equity finance is, the benefits, and how it matches up compared to debt financing.
Equity finance: what it is and how it works
What is equity finance?
Equity finance is when a business raises money by selling shares to investors. In return, the investor receives a stake in the company and may benefit from future profits or a return on investment if the business is sold or goes public.
Unlike a loan, there’s no obligation to repay the money or pay interest. However, you are giving up part ownership of your company.
Who provides equity finance?
Angel investors - high-net-worth individuals who invest their own money, often in exchange for a hands-on role
Venture capital (VC) firms - professional investors backing businesses with high growth potential
Equity crowdfunding platforms - pool of retail investors contributing smaller sums in exchange for shares
Private equity - larger, institutional investments typically for more mature businesses
Family offices and high-net-worth networks - long-term investors with a more personalised approach
Common use cases
Launching a startup
New businesses often use equity funding when they have big ideas but limited trading history, making debt finance harder to access.
Scaling operations
If you’re expanding your team, entering new markets, or increasing production, equity finance can provide the capital to accelerate your plans.
Research and development
Developing new products or technology can take time and money. Equity investment can support innovation without early cash flow pressure.
Marketing and brand growth
Funds can be used to grow brand visibility, scale paid campaigns, or rebrand to better position your company.
Bridge to IPO or acquisition
Equity funding is often used ahead of major milestones like an IPO or company sale to boost valuation and visibility.
How does Funding Options work?
Tell us how much you need
We’ll ask a few questions about your business and the reason for your loan.
Get quotes instantly
Our smart technology will compare quotes from up to 120+ lenders to help you find the ideal business loan.
Apply for a Business Loan 🎉
We'll be there to guide you through every step of the process.
Why choose Funding Options by Tide?
Funding Options by Tide helps UK SMEs find fast, tailored business finance by connecting them with over 120 trusted lenders. Backed by Tide and FCA-regulated, the service is free and easy to use.
Compare 120+ lenders
Access a wide range of trusted lenders: from high street banks to alternative finance providers.
No fees or obligations
Our service is completely free to use. You’re in control of who you borrow from.
Fast, personalised results
Get real-time matches based on your business profile and funding needs.
Expert support when you need it
Our team is here to help — by phone, chat, or email.
Trusted by over 21,000 customers
Estimate your costs today
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
Want to understand the cost of your loan?
Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
Monthly payments
-
Monthly interest
-
Total interest
-
Length of loan
-
Total cost of loan
-
Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
What are the benefits of equity funding?
Equity finance can be a helpful way to grow your business, get access to strategic support, and become a bigger part of the global market. Here are some of the benefits.
No repayments or interest
Support from experienced investors
Access to larger sums of capital
Improves financial stability and cash flow
Attractive to startups and high-growth businesses
Is equity finance right for your business?
It could be the right fit if:
You’re a startup or early-stage business with growth potential
You’re looking for more than just funding—such as mentorship or access to networks
You’re comfortable giving up partial ownership
You plan to scale rapidly or seek exit in 3–7 years
You struggle to access traditional debt finance
Drawbacks of equity finance
❌ Loss of control - you may need to consult investors on strategic decisions
❌ Dilution of ownership - your share in the company is reduced
❌ Longer lead times - raising equity can take weeks or months
❌ Investor expectations - high growth expectations can add pressure
❌ More reporting obligations - especially with institutional investors or VCs
Equity finance vs debt finance
Feature | Equity finance | Debt finance |
Repayments | No | Required monthly |
Ownership impact | Dilution | None |
Investor involvement | High (VCs/angels) | Low |
Ideal for | Startups, high growth | Established businesses |
Risk to business | Lower | Higher (default risk) |
See more info on equity finance vs debt finance.
How to raise equity finance
Get investor-ready ensure you have a clear business plan, pitch deck, and financial projections. Investors want to understand the opportunity and potential return.
Decide how much equity to offer be strategic—offering too much too early could impact future funding rounds.
Identify the right type of investor whether it’s angel investors, VCs, or crowdfunding—choose investors who align with your goals.
Pitch your business present your vision, market opportunity, traction, and financial model. Be open to questions and feedback.
Negotiate terms and close the deal agree on valuation, shareholding, and any conditions. Legal due diligence follows, then funding is released.
Alternatives to equity finance
Business loans
Revenue-based finance
Invoice finance
Merchant cash advance
Crowdfunding loans
A hybrid of debt and community support
Learn more about equity finance
How is my business valued?
Initial business valuations are often calculated as a multiplier of profits after certain deductions, for instance, tax and accounting tools. Let’s say your business turns over £50,000 in profit each year and you run a niche services company. In this instance, your company could be valued at a 2-3x multiplier, equaling an approximate value of £100,000 to £150,000.
What types of businesses qualify for startup equity funding?
Most business types can qualify for equity finance. It’s more a case of whether or not equity finance might be a good idea for your business, and whether you can find an investor who might like to share ownership of your business with you. Businesses that get equity finance tend to be ones with high or fast growth potential.
Equity vs debt financing
Equity finance is an investment in your business. You sell a percentage of your business for a certain amount of money. Debt finance, on the other hand, is when you receive money or assets in exchange for repaying the funds, usually on an instalment basis, but not always, with the addition of interest.
An example of debt financing is a business loan, whereas an example of equity financing is private equity funding. Debt financing doesn’t require sacrificing ownership in your business, but it does require meeting your repayment obligations, which can put a strain on you if your business starts to struggle. However, this can be a positive if your business grows, as you won’t need to pay a percentage of your increased profits. Learn more about equity vs debt financing.
How to find equity investors for startups
Startups find investors from a range of sources, including some of the following.
VC companies
Venture capital companies are often looked to as a source of investment for high-growth startups. You can find VC companies by searching online and looking for established companies dedicated to helping startups grow.
Angel investors
Angel investors are more popular during the earlier stages of growth. There are many online platforms where you can connect with potential investors, or, you could consider reaching out to investors on LinkedIn.
Personal network
If you’ve been working in your industry for several years, you may already know a suitable investor. Consider if there is anyone you might like to work closely with, someone whose qualities and skills complement yours, and reach out to them to see if they’d be interested in investing.
Private equity companies
Like VC companies, many startups look towards private equity (PE) businesses for investment. However, PE companies often invest in more established businesses, so you may need to search for your perfect fit for a little longer.
Friends, family, or crowdfunding
You could try reaching out to friends, family, or the online community to see if anyone would like to invest. Crowdfunding platforms could help you find suitable investors online. Businesses who go down this route sometimes choose to offer an early purchase option.
What is equity capital funding?
Equity capital funding is another term for equity financing, which is when you sell a portion of your business to an investor for a lump sum, which you might use to further grow your business.
When might debt financing be more suitable than equity funding for businesses?
Debt financing might be more suitable if you’d prefer to retain full ownership of your business, if you’d like to hold onto control, or if you’d prefer not to share a percentage of your future profits. Debt financing can be easier to gain access to and there can be a shorter cycle between application and gaining the funds.
If you’re absolutely positive you can meet your repayment obligations, you’d like to establish a credit history as a business, and you want flexible options for how you will receive the funds (and for what), debt financing may be more suitable.
What types of debt financing are there?
Debt financing is a very flexible way of gaining funds. There are many different types of funding, below are just a few.
If you’d like to find out what your options may be, consider reaching out to our team. We can ascertain how much you may be eligible for and the type of funding you could benefit most from.
Auction finance
Want to buy a property at auction? You could get approved for auction finance before ever stepping foot in the auction house, meaning you’re able to bid, confident in the knowledge that your funding is sorted.
Bridging loan
A bridging loan is designed to bridge the gap between funds. Let’s say you’d like to buy a new company premises, but you need to wait to sell some of your shares to make the payment. In this instance, you could use a bridging loan to pay for the property now, then pay the bridging loan back in a year, once your sale has gone through.
Business loan
A business loan is when you get a cash lump injection, which you repay in instalments (usually on a monthly basis), with the addition of a percentage of the value of the loan as interest.
Short-term business loan
A short-term business loan is similar to a business loan for limited companies, but it is designed to be repaid within a short period, for instance, several months, rather than over a year.
Is it easier to get equity financing or debt financing?
It’s generally easier to get debt financing than equity financing, but each business is different so if there is a specific path you’d like to take, don’t let this discourage you.
Do I have to repay equity funding?
No. You’re giving away shares, not taking out a loan—there’s no repayment unless agreed via exit or dividend.
How long does it take to raise equity?
It depends on the source. Angel deals may take weeks; VC funding can take 2–3 months or longer.
Can I mix equity and debt finance?
Yes—many businesses use both to manage growth while preserving ownership.
How much equity should I give away?
Typically 10–30% in early rounds, but it depends on valuation, stage, and investor involvement.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
Vivek Seda
Asset Lending & Property Team Lead
Vivek Seda is the Asset Based Lending & Property Team Lead at Funding Options. Vivek has been in the commercial finance industry for over five years, helping SMEs in the UK access over £40m of funding in that time. He also supports the business on working on corporate finance and structured transactions successfully funding Acquisitions and MBOs for businesses.