Private Equity companies provide medium or long term financing to companies. It provides long term capital to support unlisted companies grow and succeed. Hence it fills the equity gap, i.e. the missing public capital as the companies have been supported by private capital.
How is Private Equity different from a loan?
Raising private equity capital is different from raising a loan from a bank or lender. Banks have a legal right to interest on a loan and repayment of capital, which can be secured against some assets. Hence, banks gets its returns for sure irrespective of the success or failure of the business.
Private equity is not secured against any assets, but is an investment in exchange for a stake in the company. As shareholders, the private equity company's returns are dependent on the success and profitability of the business. It offers high risk and high returns as compared to the fixed returns earned by banks in a loan.
How is Private Equity different from a loan?
Raising private equity capital is different from raising a loan from a bank or lender. Banks have a legal right to interest on a loan and repayment of capital, which can be secured against some assets. Hence, banks gets its returns for sure irrespective of the success or failure of the business.
Private equity is not secured against any assets, but is an investment in exchange for a stake in the company. As shareholders, the private equity company's returns are dependent on the success and profitability of the business. It offers high risk and high returns as compared to the fixed returns earned by banks in a loan.
Private Equity companies provide medium or long term financing to companies. It provides long term capital to support unlisted companies grow and succeed. This is very nice to hear because it's for the benefits of many.-Private Equity Firm Chicago IL-
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