equity
Definition
Equity is the ownership value you actually hold in something after you subtract what you owe on it. If your business is worth $200,000 and you have $80,000 in outstanding loans, your equity in the business is $120,000. Think of it as your true financial stake in whatever you own.
Example
When a bank considers giving you a business loan, they will look at how much equity you have built up in your business or property to decide how risky it is to lend you money.
Watch Out
When investors ask for equity in your business in exchange for funding, they are asking for a percentage of ownership, which means they get a cut of future profits and may have a say in how you run things.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.