Investment finance (also known as equity finance) involves selling part of your business (‘shares’) to an investor.

The investor will take a share of any profits or losses that the company makes.

Advantages

Advantages include:

• investors can bring new skills and opportunities to the business, e.g. marketing or exporting overseas
• you won’t have to pay any interest, or repay a loan
• you share the risks of the business with your investors

Disadvantages

Disadvantages include:

• it can be a demanding, expensive and time-consuming process
• you’ll own a smaller share of your business (although your share could eventually be worth more money if your business succeeds)
• you may have to consult your investors before making certain management decisions
• only limited companies can sell shares, so you can’t raise money in this way if you’re a sole trader or in a partnership