Equity Finance Calculator
The Equity Finance Calculator offers an initial estimate of how new investments affect company ownership and valuation. It is designed primarily for small and medium-sized enterprises (SMEs) considering equity funding options. While this tool helps clarify potential equity splits, many companies prefer using a platform or broker like Funding Agent to find investors and organise terms. For more on company valuation basics, see business valuation. Explore equity finance solutions to understand related funding methods.
Secure up to £500,000 in Business Finance with Funding Agent.
- Quick and easy application process
- Loan disbursed within 24 hours
- No additional charges for early repayment
How To Use The Equity Finance Calculator
Enter pre-money valuation
Start by typing the current business valuation agreed with investors before any new funds are added. Use a realistic figure based on revenue multiples or asset value. Understanding business valuation principles helps refine this estimate.
Add investment amount
Input the cash amount the investor will provide. This figure is used to calculate post-money valuation and investor equity. Familiarity with equity finance concepts is useful at this stage.
Review ownership outputs
Check the investor's share percentage, founder dilution, new share price, and implied post-money valuation. These outputs aid in negotiating term sheets and comparing offers. Learn about due diligence to prepare for this process.
Benefits of Using the Equity Finance Calculator
An Equity Finance Calculator is a valuable tool for investors and financial analysts as it helps in determining the equity value of investments, facilitating better financial decisions. Providing quick and accurate calculations regarding equity financing options, it allows stakeholders to assess potential returns and risks associated with their investments. This clarity enables users to make informed choices, optimizing their portfolio performance and capital allocation strategies.
This calculator allows finance managers to swiftly explore how different valuation assumptions influence ownership stakes. By running scenarios, users can prepare for negotiations and better understand dilution risks. For detailed equity finance options, visit equity finance. Awareness of due diligence complements this insight.
How Equity Finance is Calculated
Post-money valuation
Adds investment to pre-money valuation.
Investor ownership percentage
Investment divided by post-money valuation.
Founder dilution
Original stake minus new ownership percentage.
Understanding Your Equity Finance Calculator Results
Check strategic fit
Assess whether the investor’s equity share matches governance needs and complies with shareholder agreement thresholds. Consider how this affects control and decision-making.
Stress-test variables
Modify valuation or investment amount to observe impacts on ownership percentages. Small changes can significantly affect founder dilution, which typically ranges from 10 to 30 percent in UK funding rounds.
Account for extras
Keep in mind that legal fees, option pools, and performance conditions may further dilute equity. This calculator assumes ordinary shares are issued at face value without special clauses.
FAQ’S
How does an Equity Finance Calculator work?
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