Equity finance is the process of raising capital through sales of shares. Both public and private companies raise money for short term needs. Equity financing can come from friends, family, professional investors or an initial public offerings(IPO).
It basically involves the selling of equity instruments such as different types of preferred stock and equity units and warrants. The startup that grows into successful company will have several rounds of equity financing. Equity finance are often used by startups but companies which have risky business, some business looking to manage debt, established SMEs looking to expand.