With the high cost of starting a business, it's easy to see why small business equity is so popular. Rather than risking your own money, or taking on too much debt, small business equity financing allows you to raise funds for your business in exchange for a percentage of ownership.

Because this seems like a worthwhile trade-off to many people, it can be very difficult to get equity for small business. That doesn't mean that you shouldn't try. If you have the right business idea, you could have the funds you need in no time at all.

However, before you look for a small business equity investor, you should be aware of some disadvantages:

1. It may take a lot of work, time and energy in order to find small business equity lenders that are interested in your product.

2. When you enter a small business equity arrangement, you no longer have full ownership of your business. You will have to share the profits with the people or companies that invest in the business.

3. You lose some control over the management of your business. When investors have equity in a business, they have the right to give opinions on management.

Action Steps
The best contacts and resources to help you get it done

Look for small business equity sources through venture capital firms

Perhaps the most well known way to get money for your business is to go through a venture capital firm. This is best for businesses that are in technological industries and have the potential for high growth, although other types of companies may be able to find a venture capital source as well.

I recommend: If your business is in its early stages, you may want to look to a venture capital firm such as First Round Capital. On the other hand, Greycroft Partners offers funding to business that are already well established but looking to expand.

Talk to angel investors that are interested in equity in small business

Angel investors are perfect when you don't quite meet the qualifications of a venture capitalist. They are more likely to dabble in industries besides tech and offer lower amounts of money.

I recommend: US Angel Investors is in California and has an easy to understand process to apply for funding. Inc.com maintains a directory of angel investors that serve a variety of locations. This is a good place to look for investors.

Set up an IPO to get small business equity financing

An initial public offering, or IPO, can also be a good way to get your funding. In these cases, investors can purchase equity in your company, usually in the form of stock.

I recommend: If you want to take your company public, you need to talk to various securities firms. Goldman Sachs and Lehman Brothers are both excellent places to start.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  It's not easy to get small company equity lenders interested in your company. One way to boost your chances of success is to have a number of experienced professionals on your staff to assure investors that your business is viable.