Credit Factors; What Is Equity Investment?
Equity Investment What Is Equity Investment? Business loan applicants must have a reasonable amount invested in their business. This ensures that, when combined with borrowed funds, the business can operate on a sound basis. There will be a careful examination of your business' debt-to-worth ratio to help all parties understand how much money the lender is being asked to lend (debt) in relation to how much you have invested (worth). Owners invest either assets that are applicable to the operation of the business and/or cash which can be used to acquire such assets. The value of invested assets should be substantiated by invoices or appraisals for start-up businesses, or current financial statements for existing businesses. This value is also known as equity investment. How the Debt-to-Worth Ratio Affects Your Loan Application Strong equity with a manageable debt level provides financial resiliency to help your business maintain viability ...