Equity financing is a method of raising capital by selling shares of a company to investors. This approach allows businesses to obtain funds without incurring debt, as investors become part-owners of the company in exchange for their investment. The funds raised can be used for various purposes, such as expanding operations, developing new products, or paying off existing debts. Investors in equity financing typically expect a return on their investment through dividends or capital appreciation as the company grows. This type of financing is common among startups and growing businesses, as it provides essential capital while sharing the risks and rewards with investors.