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Equity Financing Alternatives for Small Business: A Review of Best Practices in the United States

3. Organization

The review will be organized in the following manner.

Framework for Review

There are many agents that provide equity financing during various stages in the development of a small business. The Framework for Review model provides an overview of the stages of growth and the various financing agents involved in equity financing activities.

SME Stages of growth

In order to understand the flow of financing from different sources, descriptions of generic stages of growth have been defined.

Equity Financing Agents

A detailed list of the types of equity investors has been provided including a short description of investment habits.

Generic Finance Flow Incentives and Flow Support Systems

A broad list of factors and initiatives that facilitate the flow of equity financing to SMEs has been compiled and categorized according to the type of financing agent they affect. Also, the support systems that enable SMEs to posses these incentives are listed. These incentives are evident regardless of industry type or region characteristics.

Flow Incentives

This section lists specific programs and initiatives that facilitate equity financing in the US.

Flow Support Systems

Flow support systems are initiatives or programs that allow entrepreneurs to access and develop flow incentives in order to improve their chances of receiving equity financing.

Flow Linkage Systems

Linkage systems do not positively affect the decision to invest; however, they increase the accessibility of investors to entrepreneurs and vice versa. In effect, linkage systems increase the overall level of equity financing for small businesses. The larger the number of effective linkage systems in a given investment setting the more accessible risk capital will be for entrepreneurs. Angel networks and financing consultants with established networks of investors are two examples of linkage systems.

Summary of Recent Empirical and Theoretical Analyses

 

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