There is a funding formula designed by lenders and to finance development projects especially SMEs and innovation: these are the so-called equity loans. The peculiarity of this type of loan is for a party, often significant, compensation is proportionate to the economic performance of the company funded.
The same is so called because those who provide this type of financing participate and shall bear a higher risk than traditional lenders, thus participating to the increases in value of the financed firm.
The equity loans are generally in the medium or long term, with some innovative features that differentiate them from other funding, for remuneration, reimbursement and guarantees.
Remuneration, i.e. the payment of interest on loans is based on the sum of two components: a guaranteed minimum amount, which the count is made by reference to a base rate, plus a sum absolutely variable that needs to be returned in proportion to the company’s profits.
The method of calculation of the variable component of the equity loans is not the same for all institutions, ranging from the payment of a sum percentage of the net profit for the year up to the definition of more complex systems of evaluation of increases in the value of the company.
Instead, the repayment of capital and guarantees for these types of loans is borne by the members rather than the company.
In fact, the shareholders through the payment of a fee they pay directly into the account of the company, go to the debt problems in the bank, acquiring a credit to the company itself that represents an advance in risk capital.
There are also two types of equity loans, financial services and so-called equity.
The former are credits granted by banks to companies and are paid on the basis of agreements with the shareholders with respect to how they intend to increase and capital appreciation of the company and how they want to redeem the units.
The loan instead of equity requires that the credit institution that provides the loan to become partner in the beneficiary, thus acquiring a share of the share capital and thus also participate in the profits.
This type of loan could be particularly useful for small businesses and for businesses in start-up phase.
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