What does equity financing allow a company to do?

Equity financing allows a company to generate capital without incurring debt obligations by selling a stake in the business to investors in exchange for funds. This method provides the company with the necessary resources for operations, expansion, or new projects without the burden of repaying loans or interest. By issuing shares, a company can avoid the financial strain and obligations that come with borrowing, thereby maintaining a healthier balance sheet and reducing the risk associated with debt.

In contrast, offering loans to investors does not align with equity financing, as equity involves ownership stakes rather than debt. Reducing the number of outstanding shares pertains more to share buybacks and does not reflect the purpose of equity financing. Exchanging equity for assets hints at potential transactions that might not directly relate to the core concept of raising capital through equity financing.