Maricor Bunal
Equity is a household term for those involved in financial industries (e.g., consumer loan providers, business owners, mortgage brokers). But if this is new to you and you’ve heard of this term only when you applied for a loan, it helps to understand this concept now than letting this pass from the left ear to the right.
Our financial agents here at Loansolutions PH can greatly help you regarding these topics. We can even facilitate your loan application if you’re already ready to pool money for your planned venture.
What does equity mean?
In simplest terms, equity means the value of an asset after deducting all debts and liabilities associated with it. There are also specific definitions of equity, depending on the type of assets being referred to.
For instance, the following are the common asset types and their equity definitions:
Stocks
An ownership interest owned by investors in a private, non-publicly trading company. This type is usually termed private equity.
Real Estate
Equity in real estate is termed as the real property value, which is amount the owner receives if he or she sells the property after repaying the mortgage. In short, this is the difference between the fair market value minus the mortgage the owner still has to pay.
Company Shares
In business, equity refers to the total funds, including their share of the company’s revenue, after the liabilities and debts are paid off. This is also called the shareholder’s equity.
Home Equity Loans
If you own a house and you think its value is more than what you owe on it, you can file for a home equity loan the proceeds of which you can invest in other income-generating vehicles. So what’s good about home equity loans?
- It is easier to quality for because you’ve secured it with your property.
- Qualified borrowers are offered large loanable amount, but at a lower Annual Percentage Rate (APR)
- The interest cost of this loan type may be deducted to your tax.
Equity in Business
Equity is also a crucial aspect in business, especially for startups that still need to attract investors and establish long-term relationships with them. Put yourself in your investors’ shoes at all times, which means you should put priority on securing their money and growing a successful enterprise. Give them substantial figures showing positive financial performance (e.g., increase in revenue, expansion opportunities) and a good exit strategy, if need be. It’s also a must to apply some smart equity tips such as managing your cap table, avoiding even splits and assigning founder shares. These are the best ways to protect your business’ core assets, poise for growth and retain your partners.
Equity is one of the concepts you should understand if you’re serious on acquiring valuable possessions such as a house, land or business. Or else, it would seem that you’ve invested your money on something that doesn’t have real, long-term value. Our financial agents here at Loansolutions PH can greatly help you regarding these topics. We can even facilitate your loan application if you’re already ready to pool money for your planned venture.
