The many advantages of private equity investments sometimes escape the ears of small or medium business owners. Yet capital investment is an attractive and advantageous source of financing.

In France now more than 5000 companies use investments of private equity to fund their operations. There are many others that still refuse to use them for either fear of losing the control of their company or because they do not fully understand how it works.

What is Private Equity? Is it the same thing as venture capital?

Yes, it does. Private equity can be invested mostly in four ways. One of them is Venture Capital. In this line, private equity can be invested on businesses that are starting, those that are mature, or those that are in trouble. Venture capital, growth capital, leveraged buyouts help companies during their cycle of life.

Is there an advantage for a business owner to use capital investments?

The entrepreneur wants to start a business or wishes to develop it but the bank is reluctant to extend credit. Private equity investors may be a valuable aid. With the exception of leveraged buyouts, it allows the company to strengthen its own funds without additional indebtedness or guarantees required. In addition, the company, and credibility, could see its borrowing capacity restored.

Can the private equity investor become another partner?

Capital investors usually have a plan of leaving the company after a certain number of years. However this date is not determined before hand. Capital investors want to provide funding to the business and focus more on the long term rather than the short.

Although it is not established at the beginning of their participation, private equity investors do not generally stay longer than seven years. This may vary according to the project and there is not a determined deadline. During the time the investor stays in the company, he or she receives a profit on the basis of his or her share. It is when the shares are sold that profits increase.

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